OPR to remain at 3.00% for the rest of 2023-2024 unless there are unexpected adverse developments to the economy - Manokaran

WEEKLY MARKET ANALYSIS BY MANOKARAN MOTTAIN

BANK Negara Malaysia’s Monetary Policy Committee (MPC) has decided to maintain the Overnight Policy Rate (OPR) at 3.00%, marking the third consecutive session where the committee has opted to pause at the same level.

It was no surprise the MPC kept the OPR rate at 3.00% given the declining inflationary pressures and comparatively slower GDP growth in 2Q2023.

The MPC disclosed that at the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with its current assessment of the inflation and growth prospects.

Nevertheless, the MPC will be vigilant on the on-going economic developments on the local economy as the growth outlook remains subjected to downside risks mainly from a slower momentum in major economics, higher than anticipated inflation, escalation of geopolitical tensions and a sharp tightening in financial market conditions.

The next meeting for the MPC will be held on 1-2 November 2023.

Going forward I expect the MPC to maintain the OPR at 3.00% for the rest of 2023 and well into 2024 unless there are unexpected adverse developments to the local economy.

I expect the Malaysian economy to grow between 3.0% - 4.0% for 2023 and between 4.0% -5.0% next year.  

KLCI Index

The performance of the KLCI Index was well within my expected range of between 1,430-1,475 points as sentiments continued to be dominated by regional and macroeconomic developments.

Analyzing the recent market movements, it is quite clear that the trading activities of foreign funds dictate the direction of the local stock market.

Given the lack of major developments in the coming week, I expect the local stock market to remain in a consolidation mode and keeping my view that the KLCI Index will continue to remain within the 1,430-1,475 points range for the coming week.     

The 10-year MGS bond yields continues to be locked into a tight range of between 3.75% to 3.85% supported by strong demand from both local and foreign institutional investors.

Given the lack of developments in the bond markets, I am maintaining my expectations for yields to remain close to the 4.00% level in the short to medium term given the widening yield gap with the UST 10-year papers.   

The Ringgit performed according to my expectations last week albeit on a weaker note as foreign funds continue their profit taking.

Nevertheless, I think the outflow is temporary as the US Federal Reserve is almost certain to hold the FFR at the current rate at its upcoming meeting.

Therefore, with no major impetus on the horizon, I expect the Ringgit to trade at my expected range of between RM4.60 – RM4.70 in the coming week. - DagangNews.com