The Week Ahead: Malaysia’s trade and inflation figures for January in focus

TheEdge Mon, Feb 19, 2024 03:30pm - 2 months View Original

This article first appeared in The Edge Malaysia Weekly on February 19, 2024 - February 25, 2024

Malaysia’s trade data for January (to be released on Tuesday) as well as the inflation figures for the same month (to be unveiled on Friday) are expected to be in the spotlight this week.

Economists surveyed by Bloomberg expect Malaysia’s Consumer Price Index (CPI), which remained at 1.5% in December 2023, to have accelerated to 1.6% year on year (y-o-y) last month. Some economists believe the CPI growth may have halted and will start to recover in January as a number of tax and price adjustments take effect.

These adjustments include the 10% capital gains tax on the sale of unlisted shares by companies; the 10% low value goods tax on all imported online goods sold at under RM500; the fivefold increase in the sugar tax to 50 sen per litre for sugar-sweetened beverages; the introduction of e-invoicing for businesses, starting with those whose sales revenue are at least RM100 million, from Aug 1; and a tax of 5% to 10% on high value items such as jewellery, gold, watches, handbags and passenger vehicles priced above certain thresholds from May 1.

As for Malaysia’s exports and imports, they are expected to have grown by 2.9% and 7.6% respectively in January, according to the consensus forecast from Bloomberg.

In 2023, exports declined 8% y-o-y while imports fell 6.4% y-o-y, dragging the trade surplus down by 16.4% to RM214.1 billion. A large part of the weakness stemmed from the global semiconductor down cycle, which affected electrical and electronic (E&E) exports.

Meanwhile, Singapore will announce its January CPI data on Friday. Bloomberg expects the city state to have seen a headline inflation of 3.8% to 4.6% y-o-y and core CPI (excluding housing and private road transport) of 3.8% y-o-y last month.

Markets in China are resuming trading on Monday after a week-long break. The country is due to release its February one-year and five-year loan prime rate (LPR) fixings on Tuesday.

Among the 10 economists polled by Bloomberg, five expect the one-year and five-year LPR to be unchanged at 3.45% and 4.20% respectively, while the rest expect a range of cuts from five basis points (bps) to 15bps.

Bank Indonesia (BI) is anticipated to keep its February BI rate unchanged at 6% on Wednesday.

UOB Global Economics and Markets Research highlights that other Asia-Pacific data in focus this week include Thailand’s 4Q2023 gross domestic product (GDP) data, due on Monday. It adds that the US markets will be closed on Monday for Presidents’ Day, while the Japan markets will be closed on Friday for the Emperor’s Birthday.

Despite the shorter business week, the US earnings calendar will still be busy between Feb 19 and 23, with nearly 800 US firms reporting, of which 51 are on the S&P 500.

Attention will also be on the 60th Munich Security Conference (Feb 17 and 18) while US-China relations could be tested again when Mike Gallagher, chair of the US House select committee on competition with China, leads a delegation to Taiwan on Wednesday.

“There is again no G7 monetary policy decision this week but the focus will be on the Jan 30/31 FOMC (Federal Open Market Committee) meeting minutes mid-week (Feb 22) where markets hope to get more insights [into] when the US Federal Reserve policymakers will start to cut rates,” says UOB Global Economics and Markets Research.

Japan’s activity data and India’s Purchasing Managers’ Index (PMI) will be released this week, according to ING Asia.

“Japan will release [its] core machinery orders, January trade and flash PMI [data], which will likely advance. The recent rebound for the semiconductor sector, coupled with solid demand for vehicles, should be the main driver of the improvement. We don’t believe the January earthquake would have a significant negative impact on the outcome,” it says.

“PMI releases for February will confirm that India’s economy continues to grow strongly. The service sector PMI in particular is likely to remain above 60 and manufacturing PMI should remain in the high 50s, both signalling decent growth.”

S&P Global Market Intelligence says the flash PMI surveys from S&P Global are the highlights of the week. “January’s data helped dispel recession fears, while providing fresh signs that inflation continued its descent. With monetary policymakers eager to see more evidence that price pressures are falling, the latest data will be closely scrutinised.

“The data will also bring an update on the economic impact from attacks in the Red Sea, which thus far has been limited. Other economic data releases include business and consumer confidence surveys, as well as a swathe of official inflation statistics from various countries.”

On the local corporate front, Kuala Lumpur Kepong Bhd (KLK) will convene its 51st annual general meeting at Wisma Taiko in Ipoh, Perak, on Wednesday, while Green Ocean Corp Bhd will hold its AGM at Tropicana Golf & Country Resort in Petaling Jaya, Selangor, on the same day.

This week is set to be a busy one as we approach results reporting season, with many public-listed companies on Bursa Malaysia gearing up to announce their financial results.

MST Golf Group Bhd and Oppstar Bhd are scheduled to announce their latest quarterly earnings on Monday, followed by KLK, CelcomDigi Bhd and Pos Malaysia Bhd on Tuesday.

Wednesday is expected to see earnings releases by DRB-Hicom Bhd, Star Media Group Bhd, Nestlé (M) Bhd and Sports Toto Bhd, while Axiata Group Bhd, Hap Seng Plantations Holdings Bhd and Genting Plantations Bhd are set to report theirs on Thursday.

Dutch Lady Milk Industries Bhd, Maxis Bhd and Genting Bhd are expected to announce their financial results on Friday.

In the courts, former prime minister Datuk Seri Najib Razak’s 1Malaysia Development Bhd-Tanore trial will resume on Monday at the KL High Court.

The Federal Court will on Tuesday hear the motion for leave to appeal by the Islamic Education Development Council (Mappim) and the Coalition of National Writers’ Association (Gapena) over the constitutionality of teaching languages other than Bahasa Melayu in vernacular schools.

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