Market remains unchanged, too many negative news - Manokaran

Weekly economic analysis by Manokaran Mottain

UNSUPRISINGLY, the KLCI ended the week marginally lower at 1,602.41 points (-0.89 points or -0.05%) as the market continued its consolidation phase in the absence of any market moving catalysts.

Therefore, my view on the market remains unchanged as I believe a lot of the negative news has already been priced in by investors and the market is only waiting for the right time to rally higher while the new term outlook will be determined by news flow.

The reopening of Malaysia’s international borders on 1 April 2022 is a positive step forward. I expect the 1,600-point level will continue to be a consolidating point for the KLCI Index.

ECONOMY

Bank Negara Malaysia (BNM) Governor Tan Sri Nor Shamsiah Mohd Yunus said the country should urgently look into reforms for its social protection system as recent data from the Employees Provident Fund (EPF) indicated that 6.1m EPF members have less than RM10,000 in their accounts.

She added the public should start to rebuild their financial buffers in light of the economic recovery to ensure that they would not face serious financial hardships in the future.

BNM expects Malaysia’s Gross Domestic Product (GDP) to grow between 5.3% - 6.0% in 2022 underpinned by stronger global trade and the reopening of international borders while the unemployment rate is expected to decline to around 4% of the labour force.

She added that BNM’s monetary policy will remain “accommodative” to support a sustainable economic recovery while ensuring price stability.

As the current outlook for inflation remains mostly supply driven, BNM is closely monitoring for signs and potential effects to assess whether the price pressures are entrenched and reinforced by domestic demand factors.

This is to ensure that any potential adjustments to the Overnight Policy Rate (OPR) will only occur when the central bank is confident that country’s economic growth is firm. The OPR is currently at a historical low of 1.75%.

Separately, the central bank expects headline inflation for 2022 to come in between 2.2% - 3.2% but the outlook is dependent on the global commodity markets and supply related disruptions.

The 2022 core inflation is expected to average between 2.0% - 3.0% due to stronger demand conditions and cost pressures.

Health Minister Khairy Jamaluddin said all foreigners travelling to Malaysia would need to purchase travel insurance policies with at least US$20,000 coverage so that it will cover the quarantine, treatment and hospital admission costs in the event that they get infected with Covid-19 during their stay in Malaysia.

The regulation will over all foreigners entering Malaysia through short term social visit passes irrespective of their vaccination status. However, fully vaccinated Singaporeans, permanent residents and long-term pass holders of Malaysia and Singapore are exempted from the travel insurance requirement.

According to the 2022 Hays Salary Guide, 74% of Malaysian employers expects business activities in the country to improve in 2022. Almost half of the 9,500 respondents to the survey reported that they plan to increase their permanent staff in the coming 12 months.

The salary guides also disclosed that employers in Malaysia and China are planning for salary increments of between 3% - 6% while the average salary increments for all the other regions are to peak at 3%.

Aside from better salary, seeking new challenges, better healthcare insurance & allowance and career progression are also other major motivators for local Malaysians looking to change jobs. 

Domestic Trade and Consumer Affairs Minister Datuk Seri Alexander Nanta Linggi said the government will extend the Keluarga Malaysia Sales Programme until the end of the Ramadhan month to allow the rakyat to purchase basic necessities at lower prices.

The National Property Information Centre (NAPIC) expects the local property market to recover this year (2022) in line with the lifting of movement restrictions and the reopening of the international borders.

NAPIC said the property 2021 saw a slight improvement over 2020 as it recorded a total of 300,497 transactions worth RM144.87 billion a 1.5% y-o-y and 21.7% y-o-y improvement in terms of volume and value.

However, the residential overhang situation in 2021 continues to worsen with 37,000 units worth RM22.79 billion in the market, an increase of 24.7% y-o-y and 20.5% in terms of volume and value respectively against 2020.

The Johor State Government said it expects around 5 million tourists to visit the state this year following the re-opening of the country’s international borders on 1 April 2022.

The projected figure is only half of the number of tourists the state received before the Covid-19 pandemic in 2019 but the state government expects te numbers to increase from thereon.

CURRENCY
 

The Ringgit ended the week virtually unchanged from the past week at RM4.2080 / USD1.00.

I believe that the local currency will trade in a tight range of between RM4.18 to RM4.23 or flattish trajectory for the coming week as the next major news would be the Federal Open Market Committee meeting in 3-4 May 2022 which is followed by Bank Negara’s Monetary Policy Committee meeting is on 10-11 May 2022.

Performance of the Ringgit against major currencies was mixed last week. The Ringgit strengthened against both the Japanese Yen & British Pound during the week.

The Yen fell to a new 6-year low against the Ringgit at RM3.4260 / JPY100 while the British Pound weakened to RM5.5212 / GBP1.00 On the flip side, the Ringgit marginally weakened against the Euro at RM4.6536 / EUR1.00 and the Singapore Dollar at RM3.1050 / SGD1.00.  – DagangNews.com