The week ahead: Focus on who will become the next PM and OPR

Political developments will continue to take centre stage this week as investors fixate on who will become the country’s next prime minister. All eyes will also be on whether Bank Negara Malaysia moves to lower its key interest rate on Tuesday.

A Bloomberg poll of 14 economists shows a split verdict, with half expecting the central bank to keep the overnight policy rate (OPR) unchanged at 2.75%, and the other half expecting it to cut the rate by 25 basis points. At its first monetary policy meeting of the year on Jan 22, Bank Negara surprised the market with a 25 bps rate cut. Most banks anticipate another cut this year, but they are unsure of the timing.

Bank Negara Governor Datuk Nor Shamsiah Mohd Yunos told reporters on Feb 12 that there was “ample room” to adjust the rate after 4Q2019 economic growth slowed to its weakest in a decade, at 3.6%, and the Covid-19 outbreak threatened to add pressure.

Last Thursday, in a bid to combat the impact of the virus, a RM20 billion package of tax relief and subsidies was announced to stimulate the economy, but economists say this will take time to filter through.

Politically-linked stocks such as Thriven Global Bhd and Eden Inc Bhd may come under the spotlight. Datuk Fakhri Yassin Mahiaddin, who is the son of Parti Pribumi Bersatu Malaysia president Tan Sri Muhyiddin Yassin — a candidate for the PM’s post — is the chairman of property group Thriven and also sits on the board of Eden.

As at last Friday, the number of members of parliament backing Muhyiddin to be PM rose to 95, just 17 seats short of the 112 simple majority.

The Pakatan Harapan coalition, meanwhile, has nominated PKR president Datuk Seri Anwar Ibrahim for the premiership. It controls 92 seats in the Dewan Rakyat.

On Friday, Attorney-General Tan Sri Tommy Thomas resigned ahead of the country getting a new prime minister. Thomas submitted his resignation letter to Tun Dr Mahathir Mohamad, who appointed him to the post for a two-year term which was due to end in June. A source told The Edge Financial Daily that Thomas wanted to resign while Mahathir is still the prime minister, albeit interim, as he was the person who appointed him.

Datuk Seri Najib Razak’s SRC International Sdn Bhd corruption trial continues this week, as does former deputy prime minister Datuk Seri Dr Ahmad Zahid Hamidi’s corruption trial.

On Wednesday, the Department of Statistics Malaysia will release January trade data. In December, exports rose for the first time in five months, by 2.7% year on year, on higher demand for manufactured and agriculture goods.

Earlier on Monday, there is the IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI), an indicator of how the manufacturing sector is performing.

China reports trade data for January and February on Saturday. But, first, on Monday, there is the Caixin manufacturing PMI data, which measures the performance of the manufacturing sector.

The Reserve Bank of Australia will have a monetary policy decision on Tuesday. “We are of the view that the Australian central bank would like to remain patient and seems comfortable on hold for now. With the Australian economy facing headwinds — from the bush fires, drought and a downturn in residential construction activity, as well as the potential negative impact of Covid-19 — we would not rule out further policy stimulus, both monetary and fiscal,” UOB Global Economics & Markets Research said in a report last Friday.

On Wednesday, Australia will release its 4Q2019 gross domestic product data. UOB expects GDP growth to increase at a faster 2.3% year on year from 1.7% in 3Q. This would bring full-year growth to 1.8% in 2019, down from 2.8% in 2018.

Over in the US, there will be a slew of key data released, including January trade (March 6), the final reading of the Markit Manufacturing PMI for February (March 2), January factory orders (March 5), final reading of wholesale inventories for January and the February unemployment rate (both March 6) as well as January consumer credit (March 7).

On March 5, the US Federal Reserve will release its latest Beige Book on economic conditions across the 12 Fed districts, which will offer some insights into how the world’s largest economy is doing.

South Korea is due to announce its final reading of 4Q2019 GDP growth on Tuesday.

At home, companies with annual general meetings this week include Atlan Holdings Bhd and MKH Bhd, both on March 5.