This article first appeared in The Edge Malaysia Weekly on May 4, 2020 - May 10, 2020

The main focus this holiday-shortened week will be on whether Bank Negara Malaysia moves to cut the overnight policy rate (OPR) for the third time this year during its monetary policy meeting on Tuesday to support the economy amid the Covid-19 onslaught.

There will also be a slew of key macroeconomic data out this week, including March trade data on Monday. The trade numbers will be closely watched as the Movement Control Order, which led to a massive slowdown in economic activity, started on March 18.

Last Friday, Prime Minister Tan Sri Muhyiddin Yassin announced that from May 4, almost all economic sectors and businesses would be allowed to reopen while social restrictions would ease substantially, subject to strict conditions, in what is deemed a conditional MCO. Economic and social activities that are still restricted are those that involve close contact, big groups of more than 10 people, and places with high risk of infections.

On Friday, the Department of Statistics will release the latest labour statistics and data watchers will zoom in on the March unemployment rate. Chief statistician Datuk Seri Dr Mohd Uzir Mahidin had warned last month that the pandemic could have begun impacting the unemployment rate in March. The February rate, which rose 3.3% year on year, had remained unaffected.

Thursday is a market holiday in Malaysia, Singapore, Indonesia and India owing to Wesak Day.

Most economists expect Bank Negara to cut the OPR by 50 basis points on Tuesday. The central bank has already cut the benchmark interest rate twice this year — on Jan 22 and March 3 — by 25bps each time, to 2.5%.

However, OCBC Bank economist Wellian Wiranto believes Bank Negara may just keep the rate unchanged this week. “In the case of Malaysia, the economic body is simply not ready to absorb the rate cut now due to the six-month moratorium [on loan repayments given by banks]. Since most borrowers do not need to service their loans at all, lower interest rates mean very little. Moreover, there are the potential side effects to consider. For a currency that remains inadvertently tied in investors’ minds to oil’s (mis)fortunes, the ringgit’s trajectory might be impacted further by reduced yield differentials. To best ensure an eventual recovery, the continued health of the banking sector — which bears the brunt of the moratorium’s costs — is crucial too,” he says in an April 30 report.

On the corporate side, Permodalan Nasional Bhd will be releasing its 2019 annual report and strategic plan for 2020-22 on Monday.

Outside Malaysia, the US and China are expected to announce their latest trade data, which will offer some clues to the extent of which the world’s largest and second largest economies have been affected by the pandemic. The US will announce its March numbers on May 5 while China will announce its April numbers on May 7.

This comes after the US announced last week that its economy contracted at an annualised rate of 4.8% in 1Q2020, the steepest decline since 4Q2008. China’s declined 6.8% y-o-y in the same quarter, its first-ever quarterly contraction.

Also out in the US this week will be the final reading of the Markit services Purchasing Managers’ Index (PMI) for April (May 5), the latest MBA mortgage applications (May 6), the Challenger job cuts for April and initial jobless claims data (May 7), as well as the country’s unemployment rate for April (May 8). In March, the unemployment rate rose to 4.4% from a 50-year low of 3.5% in February.

China’s markets will reopen on Wednesday following the country’s May Day holidays. There will be the Caixin services PMI data for April on Thursday.

Hong Kong, Indonesia and the Philippines will be announcing their first-quarter gross domestic product growth on Monday, Tuesday and Thursday respectively. The Philippines will also release March trade data on Wednesday.

Australia will have a monetary policy decision to make on Tuesday, while the Bank of England (BoE) will have one on Thursday.

“We expect the BoE to keep the policy rate unchanged at 0.1%. [It] had cut rates by 65bps to 0.1%, which is its view of the lower bound, and increased its asset purchase target to £645 billion (about RM3.5 trillion). Estimates suggest that the BoE still has plenty of space to expand its current quantitative easing programme. There are £390 billion of gilts currently available to buy and that is before the enormous issuance due this year. As such, the sluggish economic backdrop would put the prospect of more BoE easing on the table,” says UOB Economics & Markets Research in an April 30 report.

Thailand will have a market holiday on Monday and Wednesday for Coronation Day and Wisakha Bucha respectively. South Korea’s markets will close on Tuesday for Children’s Day.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.