The Week Ahead: Positive Covid-19 Figures Featured After EMCO; The upcoming political decision of Bank Negara

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Malaysians will closely monitor the daily number of positive Covid-19 cases, as 34 mukim in Selangor and 14 locations in Kuala Lumpur were placed under the Reinforced Movement Control Order (EMCO) for 14 days from July 3. .

Several areas of Perak, Pahang, Melaka and Sabah were also placed under EMCO between July 3 and July 16.

Between June 29 and July 2, new cases regularly exceeded the 6,000 mark, most coming from the more industrialized state of Selangor.

The population is hoping for a drop in daily cases, following the imposition of strict movement controls and an increase in the number of residents who should be vaccinated. Last week, Malaysia received one million doses of the AstraZeneca vaccine each from Japan and the United States.

But the additional restrictions are sure to leave an even more negative impact on economic activities.

Bank Negara Malaysia is expected to make a policy decision on interest rates on Thursday July 8th. OCBC Bank sees a possibility of lowering the overnight key rate (OPR) by 25 basis points, following the stricter set of movement restrictions in addition to already tightened measures.

Its economist Wellian Wiranto told Bernama that the application of EMCO is an indication that the country may have to wait a little longer before restrictions ease and that reopening activities are unlikely. economic development by mid-July to occur. “The economic impacts could be felt more intensely even if the latest stimulus helps in some ways,” he warns.

UOB Global Economics & Market Research, however, does not expect any change in the OPR. “We expect Bank Negara to keep its key rate unchanged at 1.75% in July. With additional tax assistance to cushion the impact of the full lockdown, we expect Bank Negara to monitor the fluid situation. Resuming rate cuts may be difficult in an environment of higher inflation expectations and other central banks maintaining the status quo, ”UOB said.

The Reserve Bank of Australia (RBA) is also expected to make a political decision on July 7. ) by announcing a new A $ 75 billion (RM 233.1 billion) program once the current A $ 100 billion purchase tranche is completed in September. It now seems clear that the RBA does not intend to extend the target bond yield curve from April to November 2024, ”UOB noted.

Across the road on Monday, July 5, Finance Minister Lawrence Wong will make his ministerial statement to Parliament to outline Singapore’s support measures amid increased restrictions on Covid-19. On the same day, the city-state will also release the purchasing managers index (PMI) for retail sales for June and May, while official reserves for June will be released on Wednesday.

Singapore is also expected to announce its anticipated 2Q2021 GDP estimate between July 7-14. UOB estimates a 12.4% yoy increase and a 3.6% qoq contraction, after a sharp 30% yoy increase in industrial production in May.

China will release its official June reservations on July 7. UOB, citing Bloomberg, estimates it at $ 3.217 trillion (RM13.4 trillion) from $ 3.222 trillion in May. China will also release its Consumer Price Index (CPI) and Producer Price Index (PPI) for June, Friday July 9. According to UOB, Bloomberg poll shows CPI inflation could reach 1.4% yoy from 1.3% in May, while the increase in PPI could moderate to 8.8% yoy against 9% in May.

Meanwhile, U.S. financial markets will be closed on Monday, following the nation’s Independence Day celebration on Sunday. While there was no G7 central bank monetary policy decision this week, the Federal Reserve will release its June FOMC minutes midweek. This should give some insight into the extent of the “talk” of reducing QE. IHS Markit expects tapering to begin in 2022.

Market attention will also be on the summit of G20 finance ministers and central bankers in Venice, Italy on July 9-10.

Alongside the G20 meeting, Bank of England Governor Andrew Bailey will participate in a roundtable with European Central Bank President Christine Lagarde on July 9. There is nothing on the calendar yet for US Treasury Secretary Janet Yellen, FOMC Chairman Jerome Powell, or other senior Fed officials.

On the Malaysian corporate scene, companies due to hold their annual general meeting include KYM Holdings Bhd on Tuesday and AmFirst Real Estate Investment Trust on Wednesday.

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