‘Keeping OPR unchanged to benefit economy’

KUALA LUMPUR: Standard Chartered (StanChart) says the Overnight Policy Rate (OPR) being maintained at 3.25 per cent by Bank Negara Malaysia will be beneficial to the country’s economy as it enters a volatile second half of the year.

StanChart head of managed investment and product management Danny Chang said as the US dollar cooled off towards the end of the year, the unchanged OPR would help bring in local and international investors.

“From our point of view, local equities look attractive from a dividend yield perspective. They are also trading at premium valuations versus Asian stocks,” said Chang at the Standard Chartered H2 Global Market Outlook, here, yesterday.

“As the US dollar weakens towards the end of the year, an unchanged OPR will be beneficial as it paints a picture of stability for investors,” he said.

Chang believes the government has the capabilities to reverse the RM1 trillion fiscal deficit.

He said both Prime Minister Tun Dr Mahathir Mohamad and Finance Minister Lim Guan Eng had done these reversals before at different points in time. “If we look back, Dr Mahathir reversed the budget deficit to chunks of budget surplus during the Asian Financial Crisis in the 1990s. Lim had also done it in Penang, back when he was the chief minister on two separate occasions,” said Chang.

“Yes, the enlarged fiscal deficit is something that investors are closely following, but I also believes that investors have factored in the experience both Dr Mahathir and Lim in facing this type of situation before.”

Chang said the government would have to be more transparent on the nation’s fiscal deficit and what the policymakers would do to manage it, even as ongoing structural changes were positively viewed by foreign investors.

“However, local political uncertainties have very little impact on the market. We saw this in the lead-up to the 14th General Election and even after that.

“Despite the political noises, market was performing. What is important to us is that the US dollar has more significant impact on foreign flows and market performance,” said Chang.

As the US dollar weakens towards the end of the year, an unchanged OPR will be beneficial as it paints a picture of stability for investors. DANNY CHANG

Standard Chartered head of managed investment and product management