This article first appeared in The Edge Malaysia Weekly on June 1, 2020 - June 7, 2020
After a hiatus of almost five months as countries battled the spread of the Covid-19 virus, US-China tensions are on the rise again after the latter passed a national security law perceived as curbing freedoms in Hong Kong.
In an initial reaction, US President Donald Trump said he would announce new US policies on China, while his top economic adviser said the US will hold Beijing accountable.
Last Thursday, Trump reportedly told the press that he was “not happy with China”, after he was asked whether the US would remain in the “Phase One” trade deal, signed in January.
China has responded by stating that it will take any necessary countermeasures should the US insist on interfering in Beijing’s internal affairs.
Over in Hong Kong, street protests have broken out again over the new national security law — a resumption that will further hurt its economy, following a number of protests last year.
In the first quarter of 2020, Hong Kong’s economy shrank 8.9% year on year (y-o-y). The contraction marked its third consecutive quarter of negative growth, and was the worst quarterly drop since 1974.
Meanwhile, a slew of Purchasing Managers’ Index (PMI) data for May will be released this week. As the Covid-19 pandemic wreaked havoc globally, many economies were put into lockdown mode last month to curb the outbreak.
All eyes will be on China’s Caixin
manufacturing PMI and the Caixin services PMI that will be released on Monday. No less important is the US ISM manufacturing PMI for May, to be released on the same day.
Malaysia’s manufacturing PMI will also be announced on Monday. In April, the manufacturing PMI fell to 31.3 points, the lowest level since the survey started in 2012.
Other economic data to stoke interest is export-driven South Korea’s trade data for May, for which economists expect to see further contraction in exports and imports. Bloomberg estimates that exports could contract 25.4% y-o-y and imports, 20.5%.
Malaysia will also be releasing April external trade data on Thursday. Exports and imports are expected to decline further, as the Movement Control Order was extended throughout April. In addition, Covid-19 containment measures were also put in place globally.
In April, Malaysia’s exports dipped 4.7% y-o-y and imports contracted 2.7%. The trade surplus stood at RM12.3 billion.
Australia’s central bank is scheduled to announce its monetary policy decision on June 2. Economists see no change in the policy rate. The following day, the country will announce gross domestic product for the first quarter. The Bloomberg consensus estimate for the first quarter is 1.9% y-o-y growth versus 4Q2019’s 2.2% y-o-y expansion.
On the other side of the world, the Bank of Canada will also meet on June 3 to decide on its policy rate. Most see no changes in the present policy rate, which is already at a record low of 0.25%.
Later in the week, the European Central Bank will hold a monetary policy meeting, but no changes in policy rates are expected.
In Malaysia, the local political scene is starting to heat up again and there are likely to be more developments this week. Last Thursday, Tun Dr Mahathir Mohamad’s membership in Parti Pribumi Bersatu Malaysia (Bersatu) — the party he co-founded — was terminated with immediate effect, according to a letter signed by Bersatu executive secretary Capt (Rtd) Muhammad Suhaimi Yahya.
Mahathir’s decision to sit with the Opposition block when Parliament convened for a one-day sitting on May 18 was given as reason for the termination.
Four other members of parliament — Datuk Seri Mukhriz Mahathir, Datuk Amiruddin Hamzah, Mazlee Malik and Syed Saddiq Syed Abdul Rahman — also received similar letters informing them of their termination of party membership.
The five MPs have since issued a joint statement disputing the automatic nullification of their membership in the party.
The following day, Mahathir said that, as party chairman, he had relieved Muhammad Suhaimi of the post of executive secretary, only to be informed a short while later by Bersatu secretary-general Hamzah Zainuddin that he was no longer chairman and a member in accordance with the party constitution.
Mahathir claims he is still Bersatu chairman and attempts to remove him are invalid.
Over at the courts, the defence team representing Datuk Seri Najib Razak in his SRC International Sdn Bhd case will be making its oral submission on Monday.
Najib faces three counts of criminal breach of trust, three counts of money laundering and one count of abuse of position in relation to the misappropriation of RM42 million of SRC funds.
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