Sunday 14 Jul 2024
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This article first appeared in The Edge Malaysia Weekly on June 17, 2024 - June 23, 2024

Malaysia’s trade data will be the main focus this holiday-shortened week, with the Department of Statistics Malaysia expected to put out May export and import details on Thursday.

Monday is a stock market holiday here — as in Singapore, Indonesia and the Philippines — in conjunction with the Hari Raya Aidiladha public holiday. In Indonesia, the market will close an additional day on Tuesday.

Domestically, attention will be centred on whether May exports had improved at a stronger pace than the previous month. In April, exports had rebounded by 9.1% year on year (y-o-y), after two straight months of declines, as a surge in shipments of machinery, chemicals and palm oil offset a decline in deliveries of petroleum products and subdued electronics demand. Nevertheless, the growth was slower than consensus expectations of a 14.1% expansion.

April imports, meanwhile, increased by 15.6% y-o-y against the consensus estimate of 17.8%. On a month-on-month basis, exports plunged 11% and imports contracted 7.6%.

RHB Bank’s global economics and market strategy division believes the softer momentum in April might have been due to seasonal impact, rather than weakening external demand. “We keep our positive view for Malaysia’s trade outlook in 2024. Our view is founded on resilient economic growth momentum in major economies, upsides in commodity prices and re-­acceleration in global technology cycle,” it said in a report last month.

Over at the courts, former prime minister Datuk Seri Najib Razak’s fourth criminal trial will begin from June 19. Najib has been charged, along with former Treasury secretary-general Tan Sri Mohd Irwan Serigar Abdullah, with six counts of criminal breach of trust involving government funds of RM6.6 billion that was paid to International Petroleum Investment Co (IPIC).

June 19 will also see the continuation of the SRC International Sdn Bhd civil suit against Najib.

Elsewhere, Indonesia and Japan will release their respective May trade data on June 19.

The Bank of Indonesia (BI) is due for an interest rate decision on June 20. A Bloomberg survey sees the central bank staying pat on the 6.25% rate.

UOB Global Economics & Markets Research, which is also of the opinion that the rate will stay the same, notes that amid higher for longer interest rates, BI has maintained its view for the Indonesian economy to grow stronger in 2024 with a target range of 4.7% to 5.5% y-o-y, on the back of strong private consumption, acceleration of government spending and steady investment. “Going forward, we look for BI to start normalising its benchmark interest rate level … to 5.75% in 1Q2025,” UOB said in an outlook report last Friday.

Meanwhile, the Reserve Bank of Australia, which has a monetary policy decision on June 18, is also expected to keep rates unchanged.

A slew of macroeconomic data releases will be out in China this week, including industrial production, new home prices, used home prices, retail sales, property investment and residential property sales, all for the month of May, on June 17.

On June 20, the country will also announce its latest loan prime rate (LPR) data. A Bloomberg poll as at June 14 anticipates that the one-year and five-year LPR will stay unchanged at 3.45% and 3.95% respectively, although a small minority are forecasting a cut of 10 basis points (bps) to both.

“That said, the beginning of the US Federal Reserve’s rate cut, which we expect to be in September 2024, would create the space for further monetary policy easing by the People’s Bank of China. As such, we expect the one-year LPR to fall to 3.20% by end-4Q2024 while the five-year LPR may stay on hold at 3.95% through the rest of 2024 after the 25bps reduction in February,” says UOB.

The LPR is a lending reference rate set monthly by 18 banks. Most new and outstanding loans in China are based on the one-year LPR, whereas the five-year rate influences the pricing of mortgages.

Over in the US, key data out this week includes May industrial production, retail sales and business inventories (June 18); building permits and housing starts (June 20); and preliminary S&P Global manufacturing and services Purchasing Managers’ Index numbers (June 21).

Meanwhile, US financial markets will close on June 19 to mark the Juneteenth holiday, which commemorates the end of US slavery in 1865. It was designated as a federal holiday in 2021.

In the UK, the Bank of England (BoE) will have a monetary policy decision on June 19, and the central bank is widely expected to keep the policy rate at 5.25%. UOB sees the BoE delivering its first rate cut only on Aug 1. The UK will also release May inflation data on June 19.

New Zealand will announce its first-quarter gross domestic product data on June 20.

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