HSBC: No further cuts in OPR this year

13 Jun 2019 / 23:02 H.

KUALA LUMPUR: There will be no more reductions in Bank Negara Malaysia’s Overnight Policy Rate (OPR) this year and it is expected that the next cut will only happen next year given the resilient Malaysian economy, according to HSBC Private Banking.

Its chief market strategist for Southeast Asia James Cheo described the OPR reduction last month as a “pre-emptive cut”.

“There are fears in the market that they (Bank Negara) will keep cutting (OPR) but the economy is still sound and there is no real need to make further cuts,” he told a press conference on the HSBC Private Banking 2019 2H Investment Outlook in Asia today.

“From now to the end of the year, BNM will be on hold in terms of policy rates and depending on the situation next year, they will assess the situation,” he added.

HSBC Private Banking has forecast Malaysia’s gross domestic product growth to stay firm at 4.5% in 2019 and 4.3% in 2020, as private consumption is going to remain robust despite a more uncertain global trade environment.

Cheo said Malaysia’s economy is expected to stay resilient, driven by strong consumer spending and a diversified export base. The resilience of consumer spending is a reflection of a relatively tight labour market and steady wage growth.

“Malaysia is more resilient than what most people think. To sum it up, the Malaysia economy still ‘boleh’ (can),“ he said.

It expects private consumption to remain one of the key drivers of growth for the remainder of the year, driven by a stable labour market and supportive fiscal and monetary policy.

“It (consumption) can hold up at about 6% this year because the labour market is strong, wages are rising with a young working population. This will be the engine to power Malaysia’s economy and we don’t see that waning.”

He said investments are soft so far but there is a good chance of thempicking up in the year-end or next year as public infrastructure projects start to come in.

email blast