The week ahead

Inflation, foreign reserves, Q1 earnings

IT’S a quiet week for economic data with the most anticipated data coming Wednesday when the Statistics Department releases the inflation rate for April.

The consensus estimates for inflation rate, as measured by the Consumer Price Index (CPI), to fall by 0.1% in the month of April. Economists expect the headline figure to remain at its recent lows, reflecting a decline in fuel costs.

The country’s inflation rate fell by 0.2% in March due to a decline in the Transport Index as fuel costs fell.

Bank Negara will also be announcing an update to its international reserves on Friday. The international reserves amounted to Us$102.5bil as at April 30.

Meanwhile, a slew of corporate earnings are expected to be released this week including CIMB Group Holdings Bhd, Malayan Banking Bhd (Maybank), Genting Bhd, Genting Malaysia Bhd and Genting Plantations Bhd.

According to Bloomberg consensus, Maybank’s net income adjusted in the first quarter is expected to be Rm1.67bil while CIMB’S net income adjusted is Rm1.064bil.

China’s ‘two sessions’

China’s annual National People’s Congress (NPC) seems to be the key risk event for markets.

The first of the two annual meetings, the Chinese People’s Political Consultative

Conference, starts on Thursday, while the second meeting, the NPC on Friday.

According to reports, proactive fiscal policies are expected at the two sessions and are needed to promote the recovery of the real economy.

UOB Economics & Markets Research said there are three key issues markets will look for in this year’s NPC.

The first is China’s growth target for 2020 and the government’s projection of the growth recovery trajectory. The second is additional fiscal and monetary stimulus announcements and the financing of fiscal measures and lastly the state of Us-china relations.

Just ahead of the two sessions, the People’s

Bank of China will decide on the next move in its loan prime rates for one- and five-year tenors.

Thailand’s GDP likely to contract

Thailand, which is scheduled to announced its gross domestic product (GDP) for first quarter on Monday, is widely expected register its first quarterly contraction in six years.

The country, which is heavily reliant on tourism, is forecast to have contracted 4.0% in the first quarter from earlier, according to the poll’s median estimate from 15 economists.

Fitch forecasts the Thai GDP to contract by 5.1% in 2020, the weakest level since the 1997 Asian financial crisis.

Meanwhile, Bank of Thailand (BOT) will announce its May policy decision on Wednesday.

UOB expects BOT to further reduce its oneday repurchase rate by 25 basis points to 0.5% at this coming meeting, followed by another 25bps by the end of this year.

According to a Bloomberg poll, six economists expect a 25bps cut as well but three expect no change at 0.75%.

Bank Indonesia rate decision

Markets are expecting a rate cut from Bank Indonesia (BI). However, any further monetary easing is likely to be contingent on a stable rupiah.

BI will announce its May policy decision on Tuesday. The central bank has maintained its benchmark rate at 4.50% in April.

According to a Bloomberg poll, three economists expect no change but five expect a 25 bps cut to 4.25%

UOB viewed that the BI will still stay on hold in May and may cut another 25bps only in the third quarter.

Japan GDP to be watched

Japan is due to announce a preliminary estimate of first quarter gross domestic product (GDP) on Monday.

Economists said GDP contraction is likely to be small as only partial movement restrictions were introduced in Japan.

In a report, ING economist Prakash Sakpal expects a 1.6% year-on-year fall in Japan.