The Week Ahead: OPR, China’s 4Q GDP and Davos in focus

TheEdge Tue, Jan 22, 2019 05:00pm - 5 years View Original


The key things to watch out for this holiday-shortened week are China’s 4Q2018 economic growth data (Jan 21), Bank Negara Malaysia’s first monetary policy decision of the year (Jan 24) and developments at the World Economic Forum in Davos, Switzerland (Jan 22 to 25).

On Jan 24, the Conference of Rulers will meet to elect the country’s new king and his deputy after Sultan Muhammad V of Kelantan stepped down as the 15th Yang di-Pertuan Agong. The installation ceremony will take place on Jan 31.

Monday is a stock market holiday in conjunction with Thaipusam.

That same day, China’s gross domestic product (GDP) data will be in focus. There is much interest in how the world’s second largest economy fared last year amid its damaging trade war with the US. China’s economy is expected to have grown at a slower pace of 6.4% year on year in 4Q compared with 6.5% in 3Q, according to a median forecast in a Bloomberg survey.

This would suggest a full-year growth of 6.6% last year compared with 6.8% in 2017. Only last Friday, China revised its economic growth rate for 2017 to 6.8% from 6.9%. It also revised downwards the size of its GDP to RMB82.1 trillion from RMB82.7 trillion, the statistics bureau says in a statement on its website.

Last December, US President Donald Trump and his Chinese counterpart President Xi Jinping agreed to refrain from imposing further tariffs for 90 days, providing temporary relief to global markets. Two weeks ago, delegations from both sides met in Beijing for talks aimed at finding a solution to their trade dispute.

Other Asian economies that will release 4Q2018 GDP data this week are South Korea (Jan 22) and the Philippines (Jan 24).

On Thursday, Bank Negara is expected to keep its overnight policy rate (OPR) at 3.25%. The central bank has kept the key interest rate unchanged since its 25bps hike in January last year.

Economists are divided on whether there will be a rate hike this year. Maybank Investment Bank Research takes the view that the OPR will remain unchanged at 3.25% until the end of the year amid benign inflation and a steady job market. CIMB Research, on the other hand, forecasts an OPR hike in the third quarter.

This week will also see the Department of Statistics releasing inflation data for December, as measured by the Consumer Price Index. The CPI grew 0.2% in November, the same as in August, and was the slowest growth rate reported since March 2015.

Elsewhere, there will be monetary policy decisions by the Bank of Japan (Jan 23), and the Bank of Korea and the European Central Bank (Jan 24). Market expectations are that all three will stay on pause.

Meanwhile, thousands of business, political and cultural leaders will descend on the snowy mountains of Davos from Tuesday to discuss the latest global issues at the WEF. The main theme this year is “Globalisation 4.0: Shaping a new architecture in the age of the Fourth Industrial Revolution”.

Among the prominent leaders expected to participate in the latest annual event are German Chancellor Angela Merkel, Japanese Prime Minister Shinzo Abe, Chinese Vice-President Wang Qishan, Microsoft co-founder Bill Gates, managing director of the International Monetary Fund Christine Lagarde and former US vice-president Al Gore.

Missing this year will the US government delegation. Trump last Thursday cancelled his delegation’s trip to the WEF due to the partial US government shutdown. He had earlier made known that he would not be attending. Treasury Secretary Steven Munchin and Secretary of State Mike Pompeo were supposed to have led the US delegation in Trump’s place.

The US president made the decision to cancel the delegation’s trip “out of consideration for the 800,000 great American workers not receiving pay and to ensure his team can assist as needed”, press secretary Sarah Sanders said in a statement.

British Prime Minister Theresa May will not be going either to concentrate on Brexit issues. On Jan 15, she placed a motion before UK lawmakers, asking them to rubberstamp her withdrawal agreement with the EU, but they voted down her plan by a huge margin. She now has to present a revised EU-endorsed Brexit deal to the lawmakers on Jan 21.

Markets in the US will be closed on Monday for the Martin Luther King Day holiday. This week, corporate earnings will take centre stage and the focus is expected to be major technology, pharmaceutical, gaming and airline companies.

At home, Digi.Com Bhd and KLCCP Stapled Group Bhd are scheduled to announce their FY2018 financial results on Thursday.

For the nine months to Sept 30, Digi.Com’s net profit rose 4.2% to RM1.16 billion from a year ago while revenue grew 3.3% to RM4.85 billion.

Companies with annual general meetings this week include Bright Packaging Industry Bhd (Jan 22), Fraser & Neave Holdings Bhd and Homeritz Corp Bhd (Jan 23), TMC Life Sciences Bhd (Jan 24) and OCR Group Bhd and NWP Holdings Bhd (Jan 25).

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