KUALA LUMPUR, July 31 (Bernama) -- Bursa Malaysia ended higher on Friday as investors continued to accumulate blue-chip stocks in line with stronger performances across most regional markets. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 4.50 points to 1,724.90 from yesterday’s close of 1,720.40. The benchmark index opened 0.83 of a point higher at 1,721.23, and moved between 1,715.67 and 1,730.12 throughout the day. The broader market was positive with gainers outpacing losers 707 to 402, while 547 counters were unchanged, 1,085 untraded and 56 suspended. Turnover expanded to 3.03 billion units valued at RM3.56 billion from 2.49 billion units valued at RM2.25 billion on Thursday.
China's central bank is expected to implement its most significant interest rate cuts in a decade next year as policymakers work to counter economic headwinds, including weak domestic demand, deflation, and the potential impact of US tariffs under President-elect Donald Trump.
Key Projections:
- Rate Cuts Expected: Goldman Sachs and Morgan Stanley predict a 40-basis-point reduction in the People's Bank of China (PBOC) policy rate in 2025, lowering the seven-day reverse repo rate to 1.1%.
- Economists’ Views: Some analysts, like Mizuho Securities, forecast even deeper cuts of up to 60 basis points in lending and policy rates.
Economic Context:
- Deflation Concerns: China faces its longest deflation streak this century, keeping real borrowing costs high despite rate cuts.
- Trade Pressures: A potential resurgence of US-China trade tensions could further strain exporters, compounding economic difficulties.
- Growth Challenges: The GDP deflator, a broad price measure, remains below zero, reflecting subdued price growth and heightened real interest rates.
Fiscal and Monetary Policies:
- Need for Stimulus: Economists like Goldman Sachs’ Hui Shan argue for fiscal measures, including increased government borrowing, to complement monetary easing.
- PBOC's Actions: In September, the central bank took a more aggressive stance by reducing the seven-day rate by 20 basis points, signaling readiness for decisive steps.
Risks and Opportunities:
- Capital Flight Concerns: Wider rate differentials with other nations could risk capital outflows, though this may ease as the Federal Reserve continues its rate-cutting cycle.
- Potential Benefits: Analysts believe rate cuts could alleviate financing burdens on households, businesses, and local governments, partially offsetting tariff-related growth impacts.
Broader Implications:
The PBOC’s anticipated moves aim to balance immediate economic relief with long-term stability, addressing deflation risks while maintaining global competitiveness. Combined with fiscal support, these measures are expected to help China navigate its economic challenges and bolster growth in 2025.
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