Next monetary policy committee meeting to be held on 7 July 2020
By Stella Goh – As published in Inve$t Malaysia 22 May 2020 issue
On Monday (18May), the FBM KLCI gained 6.72 points or 0.48% to 1410.16 from previous Friday’s close of 1403.44 as trade volume across Bursa Malaysia rose to another record high at 11.21 billion securities worth RM4.41 billion. The surge in trade volume was attributed to heavy trading of shares in Bursa Malaysia-listed oil and gas (O&G) related companies as a result of the rising price of crude oil.
Bank Negara Malaysia (BNM) has cut interest rates three times this year by a total of 100 basis points (bps), with the most recent cut of 50 bps on May 5. It had earlier cut OPR by 25bps in January and by another 25 bps in March. The current OPR rate stands at 2%. The next monetary policy committee meeting will be held on July 7, 2020.
Malaysia’s consumer price index (CPI) for April fell at a sharper rate of -2.9% from a year ago compared with Bloomberg’s survey of a -1.6% decline due to the drop in prices of transport, housing, water, electricity and fuel. Not only is this the second consecutive month of decline in CPI after the 0.2% drop in March 2020 but it is also the sharpest contraction in more than five decades. The hugely lower average price of RON95 fuel in April 2020 at RM1.27 per litre compared to RM2.08 in April 2019 contributed to the decrease in the transport component and the overall index. Nevertheless, food and non-alcoholic beverages continued to increase in April 2020 by 1.2% to 133.9 as compared to 132.3 in April 2019. Food and non-alcoholic beverages contributed 29.5% of CPI weight. Similarly, miscellaneous goods and services also rose by 2.3% followed by communication (1.6%), health (1.2%) and education (1.2%).
On Wednesday (20May), short-term interbank rates ended stable on Bank Negara Malaysia’s (BNM) operations to absorb surplus liquidity from the financial system. The surplus in the conventional system declined to RM39.71 billion from RM48.72 billion while the Islamic system fell to RM20.90 billion from RM22.78 billion. BNM has also revised the Murabahah overnight tender from RM18.9 billion to RM20.9 billion. The average Islamic overnight interest rate stood at 1.97 percent, while the one-, two- and three-week rates stood at 2.04 percent, 2.09 percent and 2.13 percent, respectively.
According to RAM Rating Services Berhad, foreign holdings of Malaysian bonds contracted RM2 billion in April 2020 compared with the RM12.3 billion drop in the preceding month as global and domestic liquidity-boosting measures were seen stabilising market sentiment.
RAM also stated that the lowering of statutory reserve requirement (SRR) while allowing principal dealers to recognise up to RM1 billion of MGS (Malaysian Government Securities) and MGII (Malaysian Government Investment Issues) as part of their SRR compliance may also have supported domestic demand for fixed-income securities which in turn lowered yields. The yield of the benchmark 10-year MGS fell 51.3bps to 2.9% as at end of April, reversing the 56.9bps surge in March. Looking ahead, RAM said the bond yields still face downside pressure as the recent measures of broadening the usage of MGS and MGII to meet SRR should support demand for government bonds.
This week, on Thursday (21May) the Ringgit was 4.3462 against USD from 4.3550 on Monday (18May). Meanwhile, the Ringgit was 3.0659 to the Sing Dollar on Thursday (21May). As at Friday (22May) 10:00 am, the FBM KLCI was at 1445.76
All of us at ShareInvestor Malaysia wish all our Muslim readers Selamat Hari Raya Aidilfitri.