The Week Ahead: All eyes on budget vote

TheEdge Mon, Nov 23, 2020 02:00pm - 3 years View Original


Following debate over Budget 2021 in parliament last week, lawmakers will vote on the proposed measures in the lower house on Nov 25.

All eyes will be on the passage of the budget this week, given that it may not be approved as some lawmakers from both the government and opposition have only given conditional support for the budget.

Experts say if the budget is not approved in parliament, there are provisions in the Federal Constitution that allow parliament to approve an interim budget to ensure that the government will continue to meet obligations such as salaries, pensions and debt servicing and that there is no disruption to essential public services.

However, there are concerns that Budget 2021 could be turned into a confidence vote against the PN government, and potentially trigger a snap election.

Last week, Umno president Datuk Seri Dr Ahmad Zahid Hamidi called on the PN government to seek a vote of confidence for Prime Minister Tan Sri Muhyiddin Yassin in the Dewan Rakyat as the best way for Muhyiddin to test his popularity in a house without a clear majority.

On the economic front, Malaysia will release the Consumer Price Index for October on Nov 25. Inflation declined 1.4% year on year in September, same as in August.

AllianceDBS Research expects the deflationary trend to persist at least until year-end, owing to subdued demand, weak oil prices and utility bill discounts, coupled with the Covid-19 virus resurgence in the country. It has forecast headline inflation to drop 0.7% y-o-y in 2020.

This week will be the last full week for third quarter corporate earnings announcements. Five of the KLCI constituents will be releasing their 3Q results: Axiata Group Bhd, Telekom Malaysia Bhd, Tenaga Nasional Bhd, Genting Malaysia Bhd and Genting Bhd.

GenM’s and Genting’s results bear watching. Last week, Genting’s 56.66%-owned Singapore casino operator, which operates Resorts World Sentosa, returned to the black with earnings of nearly S$54.5 million (RM166 million) for 3Q, against losses of S$163.3 million in the preceding quarter ended June 30, as lockdown measures eased.

Investors will be looking to see if there is similar improvement in GenM’s earnings as the casino operator reopened in compliance with standard operating procedures after the Movement Control Order period in the second quarter.

AirAsia Group Bhd, which is expected to release its 3Q earnings on Nov 24, will also be closely watched as it continues to struggle amid the pandemic, after posting a net loss of RM998.89 million in 2QFY2020 against revenue of RM118.96 million.

On the international front, in Asia, Singapore and Taiwan will release their Industrial Production data for October this week. For Singapore, the consensus estimate is a 5.2% y-o-y increase, and for Taiwan, a 7.7% y-o-y rise.

Singapore, India and Taiwan will be releasing their GDP figures for the third quarter this week. On Monday, Singapore will release its final print for 3Q2020 GDP. UOB Research expects Singapore’s 3Q GDP contraction to be revised to 5.6% y-o-y.

On Friday, India will release its growth data, and the consensus forecast is for the economy to remain in contraction but at a milder pace of 8.6% y-o-y for the quarter compared with 23.9% y-o-y in 2Q.

Taiwan will also be releasing its final print of 3Q GDP on Friday, with growth expected to stay unchanged at 3.3% y-o-y.

On Nov 26, the Bank of Korea (BoK) will make its monetary policy decision. Economists expect there to be no change to the key rate of 0.5%.

“Given the large fiscal response, including the fourth supplementary budget that was passed in late-September and a record budget for 2021, we maintain our expectation for BoK to remain on hold ahead. This also takes into consideration that the economy has continued to improve, the ‘effective lower bound’ for interest rate as well as concerns over the rising household debt,” notes UOB Research.

In the US, data that will be released during the week includes the second reading of the country’s 3Q2020 GDP, personal spending data and weekly jobless claims.

According to FXTM market analyst Han Tan, the market will also be awaiting the identity of the next US treasury secretary, as president-elect Joe Biden says he has already made his selection.

“With the US economy clearly in need of more financial stimulus, investors will assess how closely aligned the next treasury secretary will be with the policy bias within Congress in determining the near-term US fiscal response to the pandemic. 

“As for the monetary policy response, more clues may be gleaned from the incoming FOMC (Federal Open Market Committee) meeting minutes,” he says.

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