Bank Negara MPC cuts OPR by 25bp to 2.75%, banks under pressure

Wednesday, 22 Jan 2020

KUALA LUMPUR: Bank Negara Malaysia’s Monetary Policy Committee (MPC) reduced the Overnight Policy Rate (OPR) by 25 basis points to 2.75% — the lowest since 2011.

The reduction in the OPR surprised economists who expected the MPC to retain the OPR at 3%.

After the statement was announced at 3pm, shares of banks fell, dragging the FBM KLCI into the red as a rate cut would impact their net interest margins.In the statement, Bank Negara said the ceiling and floor rates of the corridor of the OPR were correspondingly reduced to 3% and 2.50%, respectively.

“For 2020, growth is expected to gradually improve, with continued support from household spending and better export performance.

“The adjustment to the OPR is a pre-emptive measure to secure the improving growth trajectory amid price stability,” it said.

At 5pm, Hong Leong Bank lost 60 sen to RM16.24, Public Bank fell 46 sen to RM19.02, CIMB 10 sen to RM5.03, Maybank five sen to RM8.55 while AmBank shed two sen to RM3.82 while RHB Bank was unchanged at RM5.84. BIMB fell 14 sen to RM4.06.

OCBC Bank economist Wellian Wiranto said with the conclusion of US-China Phase One deal and a nascent pickup in global trade flows, the outlook for Malaysian economy should have been looking better now versus two months ago, when the MPC last met.

“It appears that better may not be good enough, however. Bank Negara surprised the market and us by cutting its OPR by 25bps to 2.75% – a level not seen since early 2011. Ostensibly, it is labelled as a “pre-emptive measure”.

“The out-of-left-field nature of the cut, plus a tell-tale wariness on both global and domestic growth drivers in the statement, signal this may not be the last cut for the year – especially if economic momentum does not pick up,” he said.

Below is the statement issued by Bank Negara:

At its meeting today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) to 2.75 percent. The ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 3.00 percent and 2.50 percent, respectively.

The global economy continues to expand at a moderate pace. Latest indicators and the recent dissipation of trade tensions point to improving global trade activity.

Monetary easing across major economies in the second half of 2019 has helped ease financial conditions, and is expected to continue to support economic activity.

However, downside risks remain due to geopolitical tensions and policy uncertainties in a number of countries. This could cause a resurgence of financial market volatility and weigh on the global growth outlook.

For the Malaysian economy, latest indicators and supply disruptions in commodity-related sectors point to moderate expansion of economic activity in the fourth quarter. For 2019, growth will be within the projected range.

For 2020, growth is expected to gradually improve, with continued support from household spending and better export performance.

Overall investment activity is expected to record a modest recovery, underpinned by ongoing and new projects, both in the public and private sectors.

However, downside risks to growth remain. These include uncertainty from various trade negotiations, geopolitical risks, weaker-than-expected growth of major trade partners, heightened volatility in financial markets, and domestic factors that include weakness in commodity-related sectors and delays in the implementation of projects.

Headline inflation averaged at 0.7% in 2019. In 2020, headline inflation is expected to average higher but remain modest.

The trajectory of headline inflation will be dependent on global oil and commodity price developments and the timing of the lifting of the domestic retail fuel price ceilings.

Underlying inflation is expected to remain broadly stable, reflecting the continued expansion in economic activity and the absence of strong demand pressures.

The adjustment to the OPR is a pre-emptive measure to secure the improving growth trajectory amid price stability.

At this current level of the OPR, the MPC considers the stance of monetary policy to be appropriate in sustaining economic growth with price stability.

Reference: https://www.thestar.com.my/business/business-news/2020/01/22/bank-negara-mpc-cuts-opr-by-25bp-to-275

First residential project at TRX launched

Tun Razak Exchange (TRX) saw the official launch of its first residential project, Core Residence @ TRX by Core Precious Development Sdn Bhd, on Nov 25. The development is an 80:20 joint venture between China-based China Communications Construction Group (CCCG) and Malaysia’s WCT Holdings Bhd.

Occupying 1.65 acres, the RM1.4 billion project will have a total of 700 serviced residences in three blocks. With built-ups of 624 to 1,022 sq ft each, the units are priced from RM1.43 million to RM2.47 million, or an average of RM2,200 psf.

Amenities will include a recreational park, swimming pool, gymnasium, outdoor lounge and indoor playroom. The project is scheduled for completion by 2023.

At the launch, Core Precious chairman and managing director Zhang Bao said the location of the development allows residents to enjoy good accessibility, with the integration of transport services and access to multiple highways.

“The location also provides seamless connectivity to prime facilities nearby in retail, entertainment, education, healthcare and so on. We target to fully sell the project by 2022,” he said at the press conference.

“We are targeting international buyers as TRX is going to be the new financial hub of Kuala Lumpur. We are working with real estate agencies from countries such as Singapore, Japan and China.”

The 70-acre TRX is an integrated development that is slated to be the country’s new central business district and an international financial district. Its master developer is TRX City Sdn Bhd.

Also at the event were China Harbour Engineering Co Ltd chief financial officer Xiong Sheng Quan, TRX City Sdn Bhd chief operating officer Tan Hwa Min, CCCG Real Estate Group vice-president and CCCG Overseas Real Estate Pte Ltd chairman Sui Zhen Hai, WCT Holdings deputy managing director Goh Chin Liong and China Communications Construction Co Sdn Bhd managing director Ni Qing Jiu.

Core Residence @ TRX is also CCCG’s first project in the country. It has been in the Malaysian market for 20 years, focusing on infrastructure construction.

Speaking to the media on the sidelines of the launch, Zhang said CCCG will continue to develop its property business in Malaysia. It is currently in talks with several local partners for potential joint ventures.

“Our focus is still Kuala Lumpur, and hopefully by next year, we will be able to announce our new developments,” he added.

Reference: https://www.theedgemarkets.com/article/first-residential-project-trx-launched