This article first appeared in The Edge Malaysia Weekly on July 22, 2024 - July 28, 2024
Following the implementation of diesel subsidy rationalisation on June 10, all eyes will be on its effects on the nation’s June Consumer Price Index (CPI) data, which will be released on July 22. By Bloomberg’s estimates, Malaysia’s June CPI will likely jump to a 13-month high of 2.6% year on year (y-o-y), largely reflecting the effects of the rationalisation.
Other economies that will be releasing their June CPI data include Hong Kong on July 22 and Singapore on July 23. In the following week, Australia will release its June and 2Q CPI numbers on July 31, while Indonesia and South Korea will follow with their July CPI data on Aug 1 and 2 respectively. Japan’s July Tokyo CPI will be on July 26.
According to Bloomberg estimates, Hong Kong’s June CPI will hover between 1% and 1.2% y-o-y from 1.2% in May, while Singapore’s is forecast to decrease to 2.8% y-o-y from 3.1% in May.
”The next key data [for Singapore] will be the June industrial production (IP) on July 26, which UOB estimates will rise to 2.9% y-o-y. Assuming no further revisions to manufacturing as per the 2Q2024 gross domestic product (GDP) advance estimate, this implies a flat June IP reading,” UOB Global Economics & Markets Research economist Alvin Liew said in a July 19 report.
Singapore will release its July Monetary Policy Statement (MPS) on July 26.
“In our July MPS Preview, we noted the recent pickup in imported and external inflation warrants close monitoring, and it may be more prudent for MAS to maintain the prevailing restrictive Singapore Dollar Nominal Effective Exchange Rate slope settings for a tad longer. Thus, we deferred our base case for the start of policy normalisation (via a slight slope reduction) to the Oct 2024 MPS,” Liew said.
Other data of note for Singapore will be the final 2Q Urban Redevelopment Authority private home price index data on July 26, the preliminary 2Q unemployment rate on July 30 and 31, deposits, loans and money supply data for June on July 31, and the Singapore Institute of Purchasing and Materials Management’s Purchasing Managers’ Index for July on Aug 2.
Apart from Singapore, the only other country with a major monetary policy decision in the week ahead is Sri Lanka (July 24). UOB’s expectations are for a 25-basis-point (bps) cut to both the standing lending rate (to 9.25% from 9.5% currently) and the standing deposit rate (to 8.25% from 8.5%).
Apart from that, four Group of Seven central banks will announce their decisions over the next two weeks, beginning with the Bank of Canada (BoC) on July 24, followed by the Bank of Japan (BoJ) on July 31, and both the US Federal Reserve (Fed) and the Bank of England (BoE) on Aug 1.
For BoC, Bloomberg’s poll of 25 qualified analysts as at July 19 revealed that a majority of 14 expect the Canadian central bank to hold the rate unchanged at 4.75% while the remaining 11 expect the BoC to proceed with its second rate cut of 25bps to 4.5%.
Liew said he expected the BoJ to keep its policy rate unchanged. For the Fed, Liew believes that cooler June CPI numbers are seen to “fit in very well with the narrative of more good data that Federal Open Market Committee (FOMC) chair Jerome Powell and his colleagues alluded to during their recent commentary”.
”That will help the Fed gain greater confidence that inflation is moving sustainably towards the 2% objective, so it is supportive of our view that while the Fed will keep its current Fed Funds Target Rate steady at 5.25%-5.5% for this July FOMC, and to start to ease monetary policy in September, we reiterate our base case where we factor two 25bps rate cuts for the rest of 2024, in September and December,” he said.
As for BoE, Liew said that UOB still leans towards Aug 1 [as the] start date for the central bank to deliver its first rate cut. However, he also acknowledged that UOB’s view remains highly uncertain and data-dependent.
“The latest UK June CPI was a case in point which showed headline inflation staying at 2% y-o-y as CPI services inflation stayed elevated at 5.7% y-o-y, reflecting the stickiness of service cost pressure and its impact on slowing the descent of overall inflation,” Liew said.
Other key Asian data will include the 2Q GDP from South Korea on July 25, Taiwan and Hong Kong on July 31. For the US, the advance estimate for 2Q GDP will be on July 25, June PCE and core PCE on July 26.
Bloomberg analysts expect South Korea to post a lower GDP growth of 2.2% y-o-y from 3.3% y-o-y, while UOB expects Taiwan’s GDP to come in lower at 5.1% y-o-y from 6.56% in the first quarter, and Hong Kong to register an estimated 2.3% y-o-y versus 2.7% in the same period.
Meanwhile, the US corporate earnings reporting season is expected to go into high gear with 131 Standard & Poor’s 500 companies among 976 US firms reporting in the week of July 22 to 26.
“The spotlight will be on consumer discretionary, technology, multinational companies, car makers and pharmaceuticals. Global attention will remain on US domestic politics as the pressure on incumbent President Joe Biden to quit the race for re-election is intensifying with some media agencies reporting he may announce his decision as soon as the weekend [of July 20 to 21],” said Liew.
On the local corporate front, the only Bursa Malaysia-listed company that is expected to hold its annual general meeting is ACO Group Bhd on July 25 and PGF Capital Bhd (formerly Poly Glass Fibre (M) Bhd) on July 26.
Over at the courts, barring another adjournment, Datuk Seri Najib Razak and Tan Sri Mohd Irwan Serigar Abdullah’s criminal breach of trust trial over RM6.6 billion is set to commence on July 22 and continue until July 25.
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