Weekly Economic Analysis by Manokaran Mottain

By MANOKARAN MOTTAIN

MARKET 24-28 January 2022

The traditional pre-Chinese New Year Rally did not materialize this year given the uncertain macroeconomic backdrop this year. Hence, it is not a surprise to see the KLCI being range bound over the past week. The KLCI fell by 7.04 points or (0.46%) to end the week at 1,520.02 points.

Most of the stock markets across the region also ended the week lower due to profit taking as investors and traders took to the sidelines ahead of the Chinese New Year Holidays which will see a lot of markets closed. Going forward, I would expect the stock market to trade range bound but on a downside bias towards the 1,500 points level in the coming month.

The Governance, Integrity and Anti-Corruption Centre (GIACC) said it took a serious view of the drop in Malaysia’s score and position in the 2021 Corruption Perception Index (CPI) that was released by Transparency International Malaysia as the decline in the scores and position of Malaysia in the CPI for two consecutive years was a serious matter and could have a negative impact on the country’s economy.

Malaysia fell to 62nd spot out of the 180 countries in the CPI 2021 compared to its 57th position in 2020, with the country’s score also dropping to 48 compared to 51 in 2020 and 53 in 2019.

GIACC said the full implementation of the initiatives of the National Anti-Corruption Plan (NACP) in an aggressive and drastic manner will provide comprehensive benefit in institutionalising good governance, integrity and anti-corruption as well as provide a boost to Malaysia’s position in the CPI going forward.

ECONOMY

Domestic Trade and Consumer Affairs Minister Datuk Alexander Nanta Linggi said the Festive Season Maximum Price Control Scheme (SHMMP) for the Chinese New Year will be implemented from 29 January to 4 February 2022.

The SHMMP is implemented as a measure to stabilise the price of goods and ensure the availability of supply in the market during the Chinese New Year season.

He added that the SHMMP will complement the Keluarga Malaysia (Malaysian Family) Maximum Price Scheme (SHMKM) which is also in force from 1 January to 4 February 2022.

This raises makes the total number of controlled items during the Chinese New Year 2022 under SHMKM and SHMMP to 18 types of foodstuff ranging from chicken, chicken eggs, vegetables, dried foodstuff and pork categories.

The International Monetary Fund (IMF) had lowered its economic forecasts for the global economy in 2022 to 4.4% from 4.9% made earlier in October 2021 due to cuts for the US and China economies.

The IMF said the rapid spread of the Omicron variant had led to renewed mobility restrictions in many countries and increased labour shortages, while supply disruptions were fuelling inflation. Omicron was expected to weigh on economic activity in the first quarter of 2022, but ease up later in the year.

However, IMF raised its 2023 growth rate by 0.2% to 3.8% as it expects the current disruptions to gradually dissipate from the second half of 2022 onwards. The pandemic is now projected to result in cumulative economic losses of US$13.8 trillion (RM57 trillion) through to 2024 as compared to its previous forecast of US$12.5 trillion.

The IMF also cut its 2022 forecast for US, China and Eurozone economic growth rates by 1.2%, 0.8% and 0.4% respectively to 4.0%, 4.8% and 3.9% on the back of the failure of US President Joe Biden to pass a massive social and climate spending package, earlier tightening of US monetary policy, continued pandemic supply shortages and disruptions as well as protracted financial stress among property developers in China.

I am projecting Malaysia’s economy to grow by 4.5% in 2022 and 5.5% in 2023.

Housing and Local Government (HLGM) Minister Datuk Seri Reezal Merican Naina Merican said a total of 4,000 house buyers of 1Malaysia People’s Housing Programme (PR1MA) via the Public Sector Home Financing Board (LPPSA) affected by construction delays will be given deferred loan repayments. The complete information and process related to the deferment will be announced soon.

Malaysia’s Producer Price Index increased by 10% y-o-y in December 2021 compared to -2.1% contraction in December 2020 primarily due to a sharp hike in the mining index of 45.1% y-o-y due to higher prices of crude oil and natural gas.

The agriculture, forestry and fishing and manufacturing indices also increased by 10.9% and 7.6% y-o-y respectively driven by higher prices of fish and animal production, manufacture of refining petroleum products, vegetable & animal oils and basic chemicals, fertilizer and nitrogen compounds. 

CURRENCY

The Ringgit was generally range bound against the US Dollar throughout the week. The Ringgit closed marginally higher at RM4.1880 / USD1.00 as compared to RM4.1792 in the previous week.

It also gained against the Singapore Dollar, Yen, Euro and British Pound during the week. I am expecting the Ringgit to trade at a lower range of between RM4.16 to RM4.21 in the coming holiday shortened week.  

POLITICS

The Election Commission is scheduled to meet on February 9 to decide the nomination and polling dates for Johor.

Meanwhile, Datuk Seri Anwar Ibrahim who is the Pakatan Harapan (PH) Chairman and Parti Keadilan Rakyat (PKR) President announced that PKR will be using its own logo instead of the Pakatan Harapan logo in the upcoming Johor elections.

He said the decision was made on a consensus basis during PH’s Presidential Council meeting. PKR Organising Secretary Nik Nazmi Nik Ahmad disclosed that the party’s decision to use its own logo in the upcoming Johor state elections was due to “overwhelming” requests from the party’s grassroots and supporters as the PKR logo is much more recognisable by voters than the PH logo especially in the semi-rural areas.

Separately, Datuk Seri Anwar Ibrahim said the coalition would not work with former ally Parti Pribumi Bersatu Malaysia (Bersatu) for the Johor state election as the latter was not in the Opposition. He said PH remained open to working with other parties in the Opposition but pointed out that Bersatu was clearly a ruling party. – DagangNews.com

Manokaran Mottain has been an economist with a number of financial institutions is now managing his own firm, Rising Success Consultancy Sdn Bhd