There’s plenty that can go wrong at Opec’s big meeting on Wednesday
Msian banks reminded to keep an eye on speculative Ringgit trading
Bank Negara keeps OPR unchanged at 3%
KUALA LUMPUR: Bank Negara has maintained the overnight policy rate (OPR) at 3% at its Monetary Policy Committee (MPC) meeting held Wednesday, in line with market expectations.
Bank Negara had lowered its benchmark rate by 25 basis points to 3% in July.
“At the current level of the OPR, the degree of monetary accommodativeness is consistent with the policy stance to ensure that the domestic economy continues on a steady growth path amid stable inflation, supported by continued healthy financial intermediation in the economy.
“The risk of destabilising financial imbalances has been contained. However, the MPC will be monitoring these risks to ensure the sustainability of the overall growth prospects,” Bank Negara said in the statement.
The central bank said the domestic economy continued to expand in the third quarter of the year, driven mainly by private sector activity with some support from net exports.
“Going forward, private sector activity will remain the key driver of growth. Private consumption is expected to be sustained by continued wage and employment growth, with additional support from Government measures to increase disposable income.
“Investment activity, although moderating, will be supported by on-going infrastructure investments and capital expenditure in the manufacturing and services sectors,” it said.
On the external front, exports are expected to expand but will be constrained by soft demand from Malaysia’s key trading partners.
Overall, the domestic economy remains on track to expand as projected in 2016 and 2017.
Headline inflation for 2016 is expected to be at the lower end of the projected range of 2.0% – 2.5%. Inflation is expected to remain relatively stable in 2017 given the environment of low global energy and commodity prices, and generally subdued global inflation.
Bank Negara noted that the ringgit, along with most emerging market currencies, had experienced sharp adjustments and significant volatility due to continuing uncertainties in global economic and policy environment, and geopolitical developments. These factors could result in periods of volatility in the regional financial and foreign exchange markets.
“In this regard, Bank Negara will continue to provide liquidity to ensure the orderly functioning of the domestic foreign exchange market.
“The capital market remains accessible, deep and liquid. Banking system liquidity is ample. Financial institutions continue to operate with strong capital and liquidity buffers and the growth of financing to the private sector is consistent with the pace of economic activity,” it added.
TPP can still proceed without US, amend requirement clause: Miti Minister (New Straits Times)
BY OOI TEE CHING
KUALA LUMPUR: Malaysia and 10 other member nations in Trans-Pacific Partnership (TPP) can carry on without the US, if a requirement clause is amended, said Second Minister of International Trade and Industry Datuk Seri Ong Ka Chuan. "I think US President-elect Donald Trump's intention to withdraw from the TPP is a temporary vision. Perhaps later, he may realise the tangible benefits of TPP and change his mind accordingly," Ong said. Ong was responding to a question of Trump's announcement to quit the Trans-Pacific Partnership (TPP) trade deal on his first day in the White House. US President-elect Donald Trump had consistently campaigned on a protectionist and anti-trade platform. The 12-member TPP consist of the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. This landmark deal aims to cut trade barriers in some of Asia's fastest-growing economies and boost ties with US allies in the region. Signed by its initiator US, and 11 other participating members in February 2016, the TPP covers 40 per cent of the world's economy. It has not yet been ratified. It must be highlighted TPP can only come into force if it is approved by six countries that account for at least 85 per cent of the group’s economic output. In effect, the deal will be dead without ratification by the US, whose US$18 trillion economy make up 60 per cent of the TPP economic worth. Asked on the way forward for Malaysia, Ong highlighted a possible option is to amend a requirement clause in TPP. "It is up to the determination of 11 remaining member countries to amend the clause requiring six nations which make up 85 per cent collective approval for TPP to carry on without the US," Ong said. He was speaking to reporters here today after officiating at the "Sustainable Consolidation in Malaysia's Iron and Steel industry" seminar organised by Malaysia Steel Institute, an agency under the purview of International Trade and Industry Ministry. Ong’s view echoes that of Singapore Prime Minister Lee Hsien Loong at the recent Asia-Pacific Economic Cooperation (APEC) talks held in Peru. Singapore's Lee said the TPP, without the US, would mean a completely new agreement. This leaves the 11 remaining countries to renegotiate at least just one clause of the TPP to allow the pact to be salvaged, without America's participation. Indeed, new negotiations of the TPP would have to take into consideration new global developments. "That means, the 12 minus one will have to get together and sign an agreement with a different coming-into-effect clause. And that is fresh negotiation…and that is not so easy to do,” Lee reportedly said. “The TPP, as an agreement, has got rules as to when it comes into effect - what, how, when it does happen,” he added.
Ringgit rebounds in early trade on higher oil prices (New Straits Times)
KUALA LUMPUR: The ringgit rebounded to open slightly higher against the US dollar this morning as the three-week high oil prices helped boost investors’ appetite, dealers said. At 9.04 am, the local unit was traded at 4.4100/4180 against the greenback from 4.4170/4230 on Monday. Growing hopes for a cut in oil production among major producers, especially the Organisation of the Petroleum Exporting Countries (OPEC) which collectively produce more than a third of the world’s oil, have sent Brent crude oil prices to nearly US$49 a barrel. A dealer said the positive overnight closing of Wall Street would also influence demand later. Nevertheless, he said, the cautious stance on the back of a possible faster-than-expected US interest rate increase would weigh on sentiment. Against other major currencies, the local unit traded mostly easier. It fell against the Singapore dollar to 3.1028/1095 from 3.0994/0041 on Monday, weakened against the yen to 3.9906/9982 from 3.9857/9930 and narrowed versus the British pound to 5.5138/5260 from 5.4479/4558. However, the ringgit rose vis-a-vis the euro to 4.6922/7021 from 4.6957/6837 yesterday. -- Bernama
Bank Negara eases hedging rules (The Star)
The governor said that to further deepen the local hedging market, Bank Negara was working with the Securities Commission and Bursa Malaysia to introduce a US dollar and yuan-ringgit futures onshore exchange.
Bank Negara seen keeping overnight policy rate at 3% (The Star)
Many other FTAs Malaysia can explore if TPP fails to launch, says MITI (New Straits Times)
BY FRANCIS DASS
KUALA LUMPUR: Malaysia's trade volume is booming and there are hundreds of free trade agreements currently in effect for the nation's businesses to tap into to grow their business. Additionally, the proposed Regional Comprehensive Economic Partnership (RCEP) between the 10 member states of Asean (Malaysia, Brunei, Myanmar, Cambodia, Indonesia, Laos, the Philippines, Singapore, Thailand, Vietnam) and the six states with which Asean has existing FTAs (Australia, China, India, Japan, South Korea and New Zealand) would easily offset any negative impact of the Trans Pacific Partnership (TPP) not taking off, should the US choose to cancel the deal. Minister of International Trade and Industry II Datuk Seri Ong Ka Chuan said this today when launching the FMM SME Conference 2016. "In terms of trade, from Jan-Sept 2016, we have achieved RM1.77 trillion in trade volume (export plus import), compared to last year when it was RM1.071 trillion during the same period. "You can see that our trade fundamentals are strong and we can do better," he said during the media conference at the event. "If the TPP had been implemented, then it would result in a negative impact. For Malaysia, this TPP has not been implemented and as such it will not impact us," he said when asked on the current uncertainty facing TPP under the incoming new administration led by president-elect Donald Trump in the United States. He added that there are 625 FTAs all over the world at the moment. Some are regional and the others bilateral and more than 400 of them have been signed and concluded and implemented. In light of this global integration of trade, he said the United States could not afford to close its doors to trade.
Weak ringgit to impact 5 sectors (The Star)
Bank Negara assures no pegging of ringgit (New Straits Times)
BY ZARINA ZAKARIAH
KUALA LUMPUR: Bank Negara Malaysia (BNM) will not be pegging the Ringgit as the currency should not be decided on speculative positioning. Speaking to reporters during the third quarter Gross Domestic Product (GDP) announcement today, BNM governor Datuk Muhammad Ibrahim touched on the erratic Ringgit movement in the morning. “The Ringgit should not be determined by speculative positioning and in this respect the FX market is actually a speculative positioning. “It is very important we allow the market to decide on the level of the Ringgit. Our Ringgit level must be supported and dictated by the underlying transactions as contracted by the banks on a daily basis. “In some circumstances, the Ringgit market will be volatile, and it is incumbent upon the Central bank to show its presence in the market by asking banks to ensure that the pricing are correctly done,” he said. “We do not want the market to be dictated by certain circumstances or matters that has nothing to do with the nation’s economic fundamentals,” he added. This was in response to rumours that the Central Bank has directed banks to freeze all FX derivatives and FX spot transactions involving the Ringgit. All other transactions involving only foreign currencies will continue. BNM has however confirmed that there was no such freeze and an official statement would be issued later today.