The Week Ahead: Will investors be swayed by Tanjung Piai outcome?

TheEdge Mon, Nov 18, 2019 03:30pm - 1 year ago


Political economy-related talk may well take centre stage this week. Discussions over the outcome of the Tanjung Piai by-election on Nov 16 will likely make the headlines, whoever wins.

The outcome may also dictate the mood of “Bossku” supporters at the Kuala Lumpur High Court, where the third criminal trial — after the SRC and Tanore cases — involving former prime minister Datuk Seri Najib Razak is expected to start.

High Court judge Mohamed Zaini Mazlan will decide on Monday whether to hear or postpone the 1Malaysia Development Bhd (1MDB) audit tampering trial, under which Najib and former 1MDB CEO Arul Kanda Kandasamy are being charged. The prosecution, led by deputy public prosecutor Ahmad Akram Gharib, and Arul Kanda’s lawyer Datuk N Sivananthan have both objected to the postponement sought by Najib’s legal team.

Those following the 1MDB-related trials would recall that Arul Kanda’s name has already been mentioned in court in earlier cases. For the Tanore case, where Najib is facing 25 charges of money laundering and abuse of power, former 1MDB CEO Shahrol Azral Ibrahim Halmi reportedly told the High Court on Oct 1 that Arul Kanda had informed him of instructions from the Prime Minister’s Office for both of them to travel overseas, so that they would not be available when the Public Accounts Committee (PAC) wanted to question them over 1MDB in 2015. Both did eventually appear before the PAC (see SRC stories on Pages 58 and 59).

Tun Dr Mahathir Mohamad, who will likely have sharp words on Tanjung Piai, will be looked to to bolster sentiment on the economic front, where data watchers are looking for signs of a pickup in private investment and consumption.

On Thursday, the prime minister is slated to launch the [email protected] initiative, a programme announced in Budget 2020 that seeks to bolster employment and apprenticeship opportunities, especially among the youth and women, and reduce reliance on low-skilled foreign labour. He will also open the Employees Provident Fund’s annual International Social Well-Being Conference 2019 in Kuala Lumpur.

Third-quarter GDP growth numbers released last Friday make it a tad more challenging for Malaysia to grow 4.7% for the whole of 2019. The economy grew 4.4% in 3Q2019, which means that it will need to grow at least 4.8% in 4Q2019 for the headline figure to match the government’s projection of 4.7%. Bank Negara Malaysia’s 2019 GDP projection was unchanged at 4.3% to 4.8%, with the average for the first nine months of the year at 4.6%. October export numbers, slated for release on Dec 4, will be closely watched (see The State of the Nation on Page 10).

The bellwether FBM KLCI, which slipped below 1,600 points last Wednesday, closed at 1,594.75 points last Friday — shedding 15 points or 0.93% for the week, though ending higher last Friday. It is still 2.8% above its lowest close in the past year of 1,551.23 points on Oct 9.

On Wednesday, the Department of Statistics Malaysia is slated to release the Consumer Price Index (CPI) for October. Headline inflation slowed to 1.1% in September, down from 1.5% in August, and is expected to remain subdued in October.

“Average headline inflation in 2019 will be low. In 2020, headline inflation is expected to average higher but remain modest. This reflects mainly the lapse in the impact from consumption tax policy changes, the lifting of the domestic retail fuel price ceiling amid the relatively subdued outlook on global oil prices, and measures in place to contain food prices. The trajectory of headline inflation will, however, be dependent on global oil and commodity price developments. Underlying inflation is expected to remain stable, supported by the continued expansion in economic activity and in the absence of strong demand pressures,” Bank Negara’s Nov 5 monetary policy committee (MPC) statement read.

The central bank will release its foreign reserves data for mid-November on Friday. Foreign reserves stood at US$103.2 billion as at end-October, being 1.1 times short-term external debt and sufficient to cover 7.6 months of retained imports.

The new European Central Bank president Christine Lagarde’s speech, slated to take place later on the same day, will likely be closely watched. Central bank watchers will be awaiting minutes from the October policy meeting of the US Federal Open Market Committee. The FOMC has one more meeting this year on Dec 12. Bank Negara’s MPC, which kept policy rates unchanged at 3% on Nov 5, has no more meeting scheduled this year.

It remains to be seen if Bank Indonesia will keep its key rates unchanged or make another 25-basis-point cut on Thursday.

Meanwhile, developments in the US-China trade disputes will continue to grab headlines as will developments in Hong Kong.

On the Malaysian corporate front, the quarterly earnings reporting season is slated to pick up steam this week, with only a fortnight left of November. Companies expected to release financials for the quarter ended Sept 30 include Kuala Lumpur Kepong Bhd, Telekom Malaysia Bhd, Sunway Bhd, Magnum Bhd, Berjaya Sports Toto Bhd and Thong Guan Industries Bhd.

Companies holding an annual general meeting (AGM) this week include Malton Bhd, Lion Industries Corp Bhd, Southern Steel Bhd and Diversified Gateway Solutions Bhd. Meanwhile, companies having an extraordinary general meeting (EGM) include Serba Dinamik Holdings Bhd, Oriental Food Industries Holdings Bhd and D’nonce Technology Bhd.






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