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Friday, November 27, 2015

Market Daily Report [26 Nov 2015]

After the index's advance in the last few days, we see the FBM KLCI fell 1.33 points or 0.1% as investors locked in gains. 

The FBM KLCI index lost 1.33 points or 0.08% on Thursday. The Finance Index increased 0.05% to 14138.02 points, the Properties Index up 0.06% to 1193.05 points and the Plantation Index down 0.09% to 7513.83 points. The market traded within a range of 14.12 points between an intra-day high of 1688.79 and a low of 1674.67 during the session.

Malaysian shares rose in recent days on news 1Malaysia Development Bhd (1MDB) was selling its power assets to China General Nuclear Power Corp, instead of Tenaga Nasional Bhd ( Valuation: 1.20, Fundamental: 1.30).

Investors could have perceived such updates as good news for Tenaga, amid concerns Tenaga might overpay for state-owned 1MDB's power assets to bailout the company.

However, as the news passed, the market sensed a lack of catalysts exciting the share market.

Exports based companies are closely watched as as these firms are seen as beneficiaries of a weaker ringgit against the US dollar.

At 5pm, the ringgit weakened to 4.2218 against the US dollar.
Bursa Malaysia ended the day with 2.33 billion shares, valued at RM1.97 billion transacted.

Top gainers included Ajinomoto (M) Bhd and Chee Wah Corp Bhd. 

Ajinomoto (M) Bhd lead the top gainer for the day
Top losers were Nestle (M) Bhd and Malaysian Pacific Industries Bhd.

Nestle (M) Bhd lost RM1.48 as of closing
The top active counter was Borneo Oil Bhd.

Across the region, Japan’s Nikkei 225 was up 0.49%, while South Korea’s Kospi rose 1.06%

Reuters reported Asian shares advanced on Thursday, while the euro remained under pressure on growing bets the European Central Bank will roll out more stimulus soon, even as the U.S. Federal Reserve looks set to raise interest rates.

Wednesday, November 25, 2015

Wall Street ends higher on global tension

Wall Street ends higher on Tuesday as energy stock rose along with oil prices after Turkey shot down a Russian warplane near the Syrian border.

The three major U.S. indexes recovered from a morning selloff that was triggered by the overseas news despite some strong U.S. economic data.

Relatively light trading appeared to exaggerate swings in the market, according to Frankel, as many market participants were away ahead of the U.S. Thanksgiving holiday. Markets will be closed all day Thursday and close early Friday.

The Dow Jones industrial average rose 19.51 points, or 0.11 percent, to 17,812.19, the S&P 500 gained 2.55 points, or 0.12 percent, to 2,089.14 and the Nasdaq Composite added 0.33 points, or 0.01 percent, to 5,102.81.

Investors steered clear of many of Nasdaq's higher-valuation stocks like Netflix and instead took safety in cheaper stocks due to geopolitical concerns, according to J.J. Feldman, portfolio manager at Los Angeles-based Miracle Mile Advisors.

The U.S. economy grew at a 2.1 percent pace in the third-quarter, compared with an earlier estimate of 1.5 percent, data showed, but consumer sentiment in November was the weakest since September 2014 ahead of the crucial holiday shopping season.

Advancing issues outnumbered declining ones on the NYSE by 1,893 to 1,162, for a 1.63-to-1 ratio on the upside; on the Nasdaq, 1,659 issues rose and 1,121 fell for a 1.48-to-1 ratio favoring advancers.

The S&P 500 posted 9 new 52-week highs and 8 new lows; the Nasdaq recorded 63 new highs and 74 new lows.

About 6.9 billion shares changed hands on U.S. exchanges below the 7.2 billion average for the last 20 sessions, according to Reuters data.

Source: The Edge Markets

Tuesday, November 24, 2015

Market Daily Report [24 Nov 2015]

The FBM KLCI continues its' good run today with 6.13 points or 0.4% higher to close at 1,677.030.

This was a continuation of an increased of 9.01 points or 0.54% yesterday. 

FBM KLCI close at 1,677.030

Tenaga shares rose on news 1Malaysia Development Bhd (1MDB) was selling its power assets to China General Nuclear Power Corp. Investors could have perceived such updates as good news for Tenaga, amid concerns that Tenaga might overpay for state-owned 1MDB's power assets to bailout the company.

Today, fund managers said investors’ sentiment towards Malaysia had improved, as the country’s image seemed to be on a better footing with US and China, two of the world’s major economies, extending their hands to Malaysia recently.

The Finance Index increased 0.40% to 14135.16 points, the Properties Index dropped 0.10% to 1197.08 points and the Plantation Index rose 0.06% to 7502.73 points. The market traded within a range of 12.33 points between an intra-day high of 1673.92 and a low of 1661.59 during the session.

Brent futures for January climbed 51 cents to US$45.34 a barrel as of 0745 GMT, while U.S. West Texas Intermediate (WTI) crude was up 52 cents to the session's high of US$42.27 a barrel.

Bloomberg reported that Malaysia’s ringgit rose the most among emerging-market currencies; while stocks and bonds gained, after 1MDB strucked the deal with China General Nuclear.

Across Bursa Malaysia, there were 2.67 billion shares, worth RM2.39 billion, exchanging hands. A total of 573 stocks declined against 373 gainers.

The top active counter traded today was Instacom Group Bhd.

The top gainer was led by Daibochi Plastic and Packaging Industry Bhd while the top decliners included Nestle (M) Bhd and KESM Industries Bhd.

Monday, November 23, 2015

Market Daily Report [23 Nov 2015]

The FBM KLCI rose 9.01 points or 0.54% today, mainly on Tenaga Nasional Bhd share gains, amid speculation 1Malaysia Development Bhd (1MDB) may sell its power assets to foreign bidders.

1MDB's power assets are parked under Edra Global Energy Bhd.

Analysts and fund managers said Tenaga gained as investors could have perceived such updates as good news for Tenaga, amid concerns Tenaga might overpay for state-owned 1MDB's power assets to bailout the company.

The Finance Index increased 0.40% to 14135.16 points, the Properties Index dropped 0.10% to 1197.08 points and the Plantation Index rose 0.06% to 7502.73 points. The market traded within a range of 12.33 points between an intra-day high of 1673.92 and a low of 1661.59 during the session.

FBM KLCI gained 0.54% as of closing for today

Tenaga added 30 sen or 2.3% to RM13.42, to become Bursa Malaysia's fifth-largest gainer.

Actively traded stocks include GENETEC, BORNOIL-WC, INSTACO, GLOTEC, HUBLINE, NEXGRAM, BORNOIL, PUC, PESONA and CONNECT. Trading volume decreased to 2949.13 mil shares worth RM1932.04 mil as compared to Friday’s 2965.92 mil shares worth RM1956.37 mil.

Leading movers were PETDAG, with a gain of 80 cents.

The top decliners included Panasonic Manufacturing Malaysia Bhd and United Plantations Bhd.

Across Asian share markets today, Hong Kong’s Hang Seng fell 0.39%, while South Korea’s Kospi gained 0.7%. Japan markets were closed for holiday.

Sunday, November 22, 2015

1MDB near to $2.3 billion power sale to Chinese-led group

1MDB near to $2.3 billion

1 Malaysia Development Bhd, which has been embroiled in much controversy for the high debt that it has accumulated is closing on an agreement to sell control of its power business to Chinese-led bidding group as part of its plan to wind down its' operations.

An agreement with the consortium, which includes China General Nuclear Power Corp. and Qatar's Nebras Power QSC is coming to a near conclusion. The deal is said to have the 1MDB's Edra Global Energy Bhd. unit at about 10 billion ringgit ($2.3 billion), trumping a rival offer from Malaysian energy producer Tenaga Nasional Bhd. 

With so much controversy surrounding the 1 Malaysia Development Bhd, the impending rising rate by the US Fed and the unconvincing economical data coming out from China, the Malaysian Ringgit has suffered an 18% drop this year, making it as the worst performing currency in Asia. This has been beneficial to the foreign bidders to buy the 1MDB power plants. Tenaga, a Kuala Lumpur-listed utility controlled by the nation's sovereign fund, is wary of overpaying because it needs to justify any acquisition to shareholders. This is to avoid to be seen as a bail out as there are so many news and controversies surrounding 1MDB.

“This deal would be very significant towards improving the sentiments towards Malaysia,” Danny Wong Teck Meng, chief executive officer of Kuala Lumpur-based Areca Capital Sdn., which manages about $224 million in assets, said by phone Friday. “If this deal gets finalized by the year-end, it will remove one big problem clouding the country.”

Foreign investors are normally only allowed to own as much as 49 percent of Malaysian power producers unless they obtain a waiver, as the government provides gas to electricity plants at subsidized prices.

1MDB, which almost defaulted earlier this year, expects 16 billion ringgit to 18 billion ringgit for the power plants and has received bids close to that figure, company president Arul Kanda said Oct. 31. The sale is part of 1MDB’s plan to dismantle its operations after it drew criticism from lawmakers for increasing debts that totaled 41.9 billion ringgit as of March 2014.

1MDB owns a net generation capacity of 5,594 megawatts and is the largest independent 
power producer in Bangladesh and Egypt, according to its website. Besides investments in plants in Pakistan and the United Arab Emirates, it has 3,112 megawatts of capacity in Malaysia, making it the nation’s biggest independent power producer after Malakoff Corp.

Saturday, November 21, 2015

Market Daily Report [20 Nov 2015]

The FBM KLCI index gained 1.83 points or 0.11% on Friday. The Finance Index increased 0.32% to 14078.27 points, the Properties Index up 0.25% to 1198.25 points and the Plantation Index rose 0.61% to 7498.52 points. The market traded within a range of 6.35 points between an intra-day high of 1663.48 and a low of 1657.13 during the session.

It is a good way to end the week with a gain in the market after a rather downward trend at the beginning of the week. The FBM KLCI index closed at 1,661.890, a gained of 1.83 points today. It is also an increase of 2.98 points compared to last Friday (13 November 2015), so that makes the closing a lot more sweeter for the index.
FBM KLCI index gained 1.830 points
The increase happened as the global economy recovery is seen to be on the right track. The FBM KLCI index rose with the Asian share markets. 

The top active counter is Instacom Group Bhd and Globaltec Formation Bhd while the top gainers is Nestle, with a gain of 2.30 points. Other blue chips that helped the KLCI eke out gains included Petronas Dagangan Bhd and Tenaga Nasional Bhd. 

The top decliners were Warisan TC Holdings Bhd and Fraser & Neave Holdings Bhd.

Wednesday, November 18, 2015

Market Daily Report [17 Nov 2015]

The FBM KLCI index gained 5.53 points or 0.33% on Tuesday. The Finance Index increased 0.14% to 14078 points, the Properties Index up 0.11% to 1199.37 points and the Plantation Index rose 0.09% to 7489.19 points. The market traded within a range of 17.30 points between an intra-day high of 1677.37 and a low of 1660.07 during the session.

The increased of 0.33% is the first time after the index had declined for the past four consecutive days. The KLCI had tracked global markets' recovery from the shock of the recent terrorist attacks in Paris, France. This is in line with the regional performance as Asian stocks rose across the board on Tuesday, following a surge on Wall Street overnight, as investors clawed back losses that came on the back of last week's Paris attacks.

FBM KLCI increased 5.530 points to close at 1,661.530
Bursa Malaysia saw 2.16 billion shares, worth RM2.01 billion traded. Gainers outnumbered decliners at 533 against 379, while 346 shares were unchanged.

The top active for the day are Borneo Oil Berhad's warrant, BORNOIL-WC, Hibiscus Petroleum Berhad and Instacom Group Berhad.

The Top 3 Active counters for the index today
The Top 3 Gainer for the day
The top 3 gainers are Daibochi Plastic and Packaging Industry Bhd, UMW Holdings Berhad and Top Glove. 

The top loser for the day is Latitude Tree Holdings Berhad.

Top 3 Loser

Tuesday, November 17, 2015

Market Daily Report [16 Nov 2015]

The FBM KLCI index lost 2.91 points or 0.18% on Monday. The Finance Index fell 0.25% to 14058.26 points, the Properties Index dropped 0.45% to 1198 points and the Plantation Index down 0.40% to 7482.82 points. The market traded within a range of 14.51 points between an intra-day high of 1658.80 and a low of 1644.29 during the session.

This is the fourth consecutive day of decline for the index, in line with the weaker sentiments shadowing global market as investors turn cautious after the terror attack that hit Paris over the weekend.

FBM KLCI index fall consecutively for the forth day to close at 1,656.000

Across the board, 1.92 billion shares worth RM1.7 billion were exchanged. Decliners beat gainers at 597 against 347, while 308 counters remained unchanged.

The most actively traded stock was Instacom Group Bhd's warrant, INSTACO-WB, followed by the mother share and Hibiscus Petroleum Bhd. 

Hang Seng index's warrant HSI-HG led the gainers while the decliners were led by DanaInfra Nasional Bhd, United Plantations Bhd  and Panasonic Manufacturing Malaysia Bhd.

Saturday, November 14, 2015

Market Daily Report [13 Nov 2015]

The FBM KLCI index lost 4.29 points or 0.26% on Friday to close at 1,658.910. The Finance Index fell 0.20% to 14093.2 points, the Properties Index dropped 0.82% to 1203.42 points and the Plantation Index down 0.12% to 7512.82 points. The market traded within a range of 13.14 points between an intra-day high of 1664.59 and a low of 1651.45 during the session.

FBM KLCI downtrend continues
The FBM KLCI decline, was in line with the dip at most regional markets and as the local economy grew at its slowest pace since the second quarter of 2013.

Most of the indices on Bursa Malaysia ended the day in red, except for technology and mining, which increased 0.24 points and 8.11 points respectively.

There were 339 gainers, 558 losers and 360 counters traded unchanged across the exchange today. Market breadth saw 2.21 billion shares traded, worth some RM2.14 billion.

Top 3 Gainers
Top gainers were led by Fraser & Neave Holdings Bhd, Panasonic Manufacturing Malaysia Berhad and Timedotcom Bhd, with F&N seeing an upside of 48 cents to close at 18.46.

Top 3 Losers
The top 3 losers were British American Tobacco (M) Bhd, Far East Holdings Berhad and Huat Lai Resources Berhad. 

Top 3 Active
The most active counter for the day was Instaco, with 103.08 million shares done.

Kenanga Research head of research Chan Ken Yew sees a rebound next week, as the KLCI downside gap has almost been filled.

“Based on the performance today, we do not discount the possibility of a slight rebound next week, if KLCI manage[s] to hold an uptrend support line, just to fill the upside gap of 1,674.7 points to 1,680.8,” he told today.

However, Chan warned there is still a minor downside risk, unless KLCI can overcome the 1,685-point level to gain a sustainable rebound.

Thursday, November 12, 2015

Market Daily Report [12 Nov 2015]

The FBM KLCI closed 0.13% lower today at 1,663.200 as the index is weighed by losses in index-linked plantation stocks, making it the second consecutive day of decline.
FBMKLCI closed at 1,663.200

The Finance Index increased 0.46% to 14121.1 points, the Properties Index up 0.35% to 1213.34 points and the Plantation Index down 1.22% to 7521.61 points. The market traded within a range of 12.26 points between an intra-day high of 1670.03 and a low of 1657.77 during the session.

The index was dragged by losses in plantation stocks such as IOI Corp Bhd, PPB Group Bhd and Kuala Lumpur Kepong Bhd. The inventory numbers released by the Malaysian Palm Oil Board (MPOB) yesterday were higher than expected, which did not bode well for the commodity's prices.

Across the board, a total of 2.14 billion shares worth RM1.85 billion were traded. Gainers beat decliners with 476 versus 409, while 353 counters were unchanged.

The most active stock was Instacom Group Bhd.

Top 3 Active counters today
The gainers were led by Tien Wah Press Holdings Bhd, while Petronas Dagangan Bhd led the decliners.

Wednesday, November 11, 2015

Market Daily Report [11 Nov 2015]

The FBM KLCI index lost 20.79 points or 1.23% on Wednesday. The Finance Index fell 1.86% to 14056.35 points, the Properties Index dropped 0.94% to 1209.09 points and the Plantation Index down 1.39% to 7614.28 points. The market traded within a range of 16.80 points between an intra-day high of 1674.68 and a low of 1657.88 during the session.

The index closed at 1,665.320.

Across Bursa Malaysia, decliners outweighed gainers by 710 against 279, while 254 counters remained unchanged.

The top losing counter was British American Tobacco (M) Bhd, while gainers were led by Petronas Dagangan Bhd. 

British American Tobacco (M) Bhd is the biggest decliner for the day

Petronas Dagangan Bhd led the gainers with an increase of 94 cents

Hibiscus Petroleum Bhd was the most actively traded counter today, with some 156.44 million shares done.

The FBM KLCI has dropped as investors concern over China's economic growth. Market breadth was negative amid absence of fresh catalyst. The decline of the crude oil also impacted the Bursa Malaysia. 

Reuters reported that Asian stock markets pulled back slightly on Wednesday after a mixed batch of Chinese data showed that growth in the world's second-biggest economy was still in low gear.

It also noted that oil prices resumed their decline on news that US crude stocks jumped last week.

Ringgit and plantation stocks on focus

The focus today will be on both the Ringgit against a much stronger US dollar and the plantation sector. The Malaysian Palm Oil Board will announce this week Oct inventory, output and export numbers, thus the spot light on the plantation sector.

Last Monday, the KLCI eked out a 0.41-point gain to settle at 1,686.11. Yesterday, the Malaysian stock market was closed for the Deepavali holiday.

However, overnight US dollar gains could put the ringgit in the spotlight today. The ringgit was last traded weaker at 4.3825 versus the US dollar.

The Ringgit on spot light against a stronger US dollar

Reuters reported that the prospect of a US rate hike sent the dollar to a seven-month high. A strong dollar eats into the overseas sales at US companies.

In overnight US share trades, the Dow Jones Industrial Average rose 0.16% to  17,758.21 points. Nasdaq Composite fell 0.24% to 5,083.24.

With the plantation shares like Sime Darby Bhd, Kuala Lumpur Kepong Bhd, IOI Corp Bhd and PPB Group Bhd account for substantial weightage in the 30-stock FBM KLCI, it will be interesting to see how the data will impact the index as a whole. 

CIMB Investment Bank Bhd said in a note Malaysia's Oct palm oil inventory could have climbed to a record 2.72 million tonnes from the preceding month as exports dropped at a faster pace than production.

Tuesday, November 10, 2015

OCBC thinks investors shouldn't ignore Malaysia

Malaysia has been on the spot light in the business news for most of the wrong reasons recently...the low oil prices and structural changes in China are hammering the country's export revenues and the 1MDB scandal has continued to take central stage....casting doubt and uncertainties over the country's stability in politics. And yes, with the Fed rate hike more or less certain after the jobs data in October was released, we know the RM will continue to depreciate further, driving up the living costs of ordinary Malaysian folks like you and I, and yet OCBC feels that things are not as bad as it seems.

Malaysia’s GDP growth seems likely to continue ticking along at a moderate pace, helped by fiscal spending programmes. Bank Negara Malaysia is forecasting GDP growth of between 4% and 5% in 2016.


“That’s not great but it is nowhere near a recession,” says Wiranto, an economist from OCBC Bank, adding that Malaysia is likely to achieve the upper range of its growth projections next year.

“There are still growth opportunities in Malaysia which are being overlooked by the investment community owing to negative sentiment arising from the political situation,” Wellian says.

Penang’s tech sector, for example, is booming, while OCBC’s equity research team is currently bullish on the palm oil sector. It also has buy recommendations on selected stocks in transport and infrastructure.


Of course, that is not to say the risk are not there. In fact, there is a significant risk and the risks are China is transitioning from an export-led powerhouse to a more domestically-driven economy, and segments of Malaysia’s economy that formed part of the Middle Kingdom’s supply chain could face disruption.

“China is moving up the value chain and producing domestically much of what it used to outsource to places like Malaysia. This is not a temporary matter but a structural change to the Chinese economy that will impact entire supply chains,” says Wiranto.

Malaysia’s foreign exchange reserves have also been falling with the weakening ringgit. In fact, the reserves fell below US$100 billion ($142 billion) for the first time in six years in July.

As at Oct 30, BNM’s foreign reserves stood at US$94 billion as at Oct 30, which is sufficient to finance 8.7 months of retained imports and are 1.2 times the short-term external debt.

That limits Malaysia’s monetary policy options to support headline growth.

“If investors see foreign reserves continue to fall, they will likely pull out their funds as this drawdown is not sustainable. So, BNM will want to keep rates on hold while it still can to ensure stability of the ringgit,” says Wiranto.

BNM has held its policy rate unchanged at 3.25% for the time being, even as a number of other central banks have been cutting rates to boost growth.

“At 3.25%, the number of rate cuts BNM can potentially deliver is already limited by the fact that inflation is likely to stay within the 2%-3% range next year,” Wiranto says. “Against the backdrop of having to keep real rates at a fairly positive territory to prevent a worsening of Malaysia’s high level of household debt, there is not much room for them to cut rates any further at their current level.”

OCBC forecasts that the ringgit could end the year slightly stronger at RM4.22 against the US dollar, but weaken to RM4.56 by Sept 2016.

Against the Singapore dollar, the ringgit could rise to RM3.06 by year end, but fall to RM3.18 next Sept.


“The government is focusing on fiscal spending to keep the economy on its feet as nothing much can be done on the monetary side for now. The 2016 budget is less contractionary than normal with the focus on supporting growth and less on reducing the fiscal deficit,” says Wiranto. The economist has a growth forecast of 4.8% for Malaysia this year but expects that to rise to 5%-5.2% by the end of next year on the back of a rebound in exports.

Monday, November 9, 2015

Market Daily Report [09 Nov 2015]

It's a strange day for Bursa Malaysia today as FBM KLCI opened weaker but managed to climb at the 11th hour to close at 1,686.11. The index erased losses from its intraday low of 1,680.79. 

FBM KLCI closed slightly higher at 1,686.11
This is amid a weaker ringgit at 4.3763 against the US dollar.  The US dollar is strengthened after a convincing data on the US employment rate last week as the data is pointing towards a potential US interest rate hike in December by Fed. 

In the country, the weaker Ringgit directed the focus and spotlight on the export-based companies. 

Across Bursa Malaysia, there were 434 gainers versus 469 decliners. The exchange saw 2.1 billion shares worth RM1.7 billion traded.

TOP 3 ACTIVE counters
Bumi Armada Bhd is the most actively traded counter for the day, due to the rumour of the MISC FPSO merger. The counter closed at 1.11, 0.115 higher than Friday.

TOP 3 GAINER for the day

Kuala Lumpur Kepong Bhd has the honor to be the top gainer for the day, with an increase of 40 cents to 23.40, followed by Top Glove that continued its' momentum with another 32 cents increase to close at 9.72. 

Nestle was the TOP LOSER with a drop of 66 cents
Nestle (M) Bhd was the biggest decliner with a drop of 66 cents to close at 72.40. 

Bursa Malaysia will be closed for the Deepavali holiday tomorrow and trading will resume on Wednesday (11/11/2015).

Saturday, November 7, 2015

Jobs data boost chance of Dec rate hike

A stronger than expected October jobs report boost the chances of a December rate hike and Wall Street dropped slightly lower on Friday to reflect that.

Out of the 10 major sectors in S&P, nine were lower, with the interest rate sensitive utilities sector's 3% decline being the worst while the financial sectors was only up by 1% and the only gainer.

S&P 500 Index dropped slightly on Friday

The Labor Department's report showed nonfarm payrolls increased by 271,000 in October, beating the 180,000 expected. Data for August and September were revised to show 12,000 more jobs on average were created than previously reported.

The unemployment rate fell to 5.0%, the lowest since April 2008, from 5.1% in September. The jobless rate is now at a level many Fed officials view as consistent with full employment.

"I think it's good news — it's good news for the economy, eventually the market will take it as good news," said Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute in Omaha, Nebraska.

"It's a blowout number, it's a strong number for the jobs and the consumer should be feeling pretty good heading into the last couple of the months of the year."

The dollar rose to a 6½-month high after the data.

Higher rates increase borrowing costs for companies, while a rise in the dollar hurts their income from overseas markets.

Thursday, November 5, 2015

Bank Negara keeps key interest rate at 3.25%

In a statement today, Bank Negara Malaysia (BNM) said the decision to keep its key interest rate unchanged at 3.25% was made at the Monetary Policy Committee meeting today. This is in line with analysts' forecasts and with the economy continuing to be affected by the weak external environment.

Bank Negara Malaysia keeps key interest rate at 3.25%

"At the current level of overnight policy rate (OPR), the stance of monetary policy remains accommodative and supportive of economic activity," it said.

"The committee recognises that there are heightened risks in the global economic and financial environment. These risks are being carefully monitored to assess their implications on macroeconomic stability and the prospects of the Malaysian economy," it added.

"Domestic demand therefore remains the main driver of growth. However, private consumption is expected to moderate as households continue adjusting to the higher cost of living amidst an uncertain economic environment," it noted. 

"The prospects are for the economy to expand within the region of 4.5% to 5.5% this year and 4% to 5% in 2016. It is, however, recognised that the downside risks to growth remain high," it said.

BNM expects inflation to remain relatively stable for the rest of 2015, as the impact on overall inflation has been limited by the lower commodity prices and the generally low global inflation despite the weaker ringgit.

Monday, November 2, 2015

US Fed rate hike chances dependent on US jobs data

The US policymakers had pivoted in their meeting earlier last week towards a December interest rate increase, largely due to the Fed's updated model of the US economy. 

Will Janet Yellen and the Fed raise rates in December?

The model assumes that the Federal Open Market Committee (FOMC) raises the benchmark rate in late 2015. However, immediate lift-off has "been a feature" of the model since late 2014, Barclays noted.

Fed spokesman, David Skidmore declined to comment. In the current model, "the long-run growth rate is two-tenths lower" at 2%, Barclays said. FOMC participants forecast the economy's long-run growth rate at 2% in September. 

An increase in the Fed rates would have an impact well beyond the US borders, increasing borrowing costs for dollar debtors in emerging markets, pushing up the greenback against some major currencies and driving a global reallocation of investment money. 

Many believe that the US jobs data due in the coming week may hold the key to whether the Fed will raise interest rates for the first time since 2006 in December, signalling its intention to end an era of almost free dollars. According to analysts polled by Reuters, the expectation is that the US employers outside the agricultural sector to have added 180,000 jobs in October and overall earnings to have increased by 0.2% during the month. Mickey Levy, an analyst at Berenberg in New Yor said, "If we get 175,000 or 180,000 (new jobs) and wages up three tenths of a per cent, that significantly increases the probability that the Fed will raise rates in December."

The state of the US labor market is not the only concern of the Fed, which made an explicit reference to "uncertainty abroad" when it decided to hold rates steady in September. Even though this reference disappeared in the October policy statement, lower growth in emerging markets including China and falling oil prices have taken a toll on US manufacturers.