The Week Ahead: Central banks’ meetings in the spotlight

TheEdge Mon, Mar 18, 2019 01:00pm - 5 years View Original


It will be a busy week ahead for investors as meetings of central banks are set to dominate headlines, starting with the two-day Federal Open Market Committee (FOMC) meeting on March 19 and 20. The US Federal Reserve is not expected to change interest rates given the indication from its chairman Jerome Powell of a “patient” approach to interest rate adjustments. Investors, however, will be keeping an eye out for the Fed’s balance sheet reduction programme and if the bank will announce an end to it. There will also be focus on the Fed’s dot plot — a visual representation of how many members think rates will hit a given level over the short, medium and long run — but it is possible that the chart’s release may be discontinued.

It is worth noting that the US stock market has staged a strong recovery following a change in tone to a patient approach to policy rate hikes by the Fed. An unexpected outcome from the meeting would shock the market while any indication of an end to the balance sheet reduction programme might boost the US market.

The Bank of England will meet on Thursday and investors are expecting the policy to remain unchanged. All eyes will also be on the European Council meeting (March 21 and 22), especially given the uncertainties surrounding Brexit. British Prime Minister Theresa May will request for an extension to the Brexit negotiation period known as Article 50, at the meeting. The extension, however, would require the unanimous approval of the remaining European Union  member states. Meanwhile, investors are seeing March 29 as the default date for Britain to leave the EU if an agreement cannot be reached.

In Asia, there are four central bank monetary policies to watch out for: Bank of Thailand (Wednesday), Bangko Sentral ng Pillipinas (central bank of the Philippines) (Thursday),Central Bank of the Republic Bank of China (Taiwan) (Thursday) and Bank of Indonesia (Thursday). Investors will be keen to see if there are any signs of easing for both Indonesia and Philippines after their aggressive policy hikes last year. Most economists are expecting the central banks to keep their policy rates unchanged this week while the Philippines will also see a new governor-in-chief chairing its meeting.

Minutes of the Bank of Japan’s January policy meeting will be released on Wednesday.

Apart from keeping tabs on the development of central banks around the world, political events in Thailand are anticipated as Thais begin polling on March 24 — the country’s first general election since a military coup five years ago.

And if that is not enough, there will be plenty of economic data to digest this week. Japan will release its trade data on Monday, alongside its February Consumer Price Index (CPI) data on Friday. The US’ January factory orders and durable goods orders will be released on Tuesday while its January wholesale inventories will be out Friday. Other economic data includes the UK’s inflation measures, its February advance retail sales and the eurozone’s March consumer confidence.

Singapore will also be releasing its February non-oil domestic exports on Monday. Investors will pay close attention to the data given the contraction of its non-oil domestic exports for January.

On the home front, the 15th Invest Malaysia Capital Market forum on Tuesday and Wednesday is a major event co-hosted by Malayan Banking Bhd and Bursa Malaysia Bhd. Given the stark difference of a lacklustre performance in the benchmark FBM KLCI and a strong performance shown by small and mid-cap players, investors will be awaiting updates from the forum. It is expected to attract over 1,000 local and regional fund managers from Thailand, Japan, Singapore, Hong Kong, the US and the UK, with total estimated assets under management of US$20.16 trillion (RM82.4028 trillion).

Malaysia’s Consumer Price Index (CPI) data for February will also be monitored closely after the deflation surprise last month, which is mainly due to an administrative cut in fuel prices. The January CPI data fell 0.7% year on year, the first decline since 2009. With the Lunar New Year in February, economists are expecting the inflation data to turn slightly positive. The country’s foreign reserves data as of mid-March will also be released.

Meanwhile, investors will also be following up on some of the remaining companies that are releasing their financial results during the week. The notable names include Gamuda Bhd and George Kent (M) Bhd. It will be interesting to see how the results are for the companies involved in the construction sector amid uncertainties over some of the mega infrastructure projects.

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