Downside risks to Malaysia's growth prospects loom

Investors in Malaysia still exhibit some cautious play amidst opposing sentiment from the local and global economy, says OCBC.

OCBC Treasury Research noted:

The KLCI managed to close just slightly higher on Friday, with investors still exhibiting some cautious play amidst opposing sentiment from the local and global economy. Expect the bourse to continue moving sideways in the near-term, with no significant move in either direction. June CPI data due this week is unlikely to be factor for now. Meanwhile, the USDMYR may trade the 3.1700-3.1800 range intra-day.

Ahead of the CPI data due this week, we forecast inflation to have remained soft at 1.7% yoy with some slight upward bias. It is unlikely that this data will shift the BNM’s tendency towards further anchoring growth for the rest of the year, especially if we consider the fact that our Financial Conditions Index for the economy has been pointing towards some loosening of financial conditions in recent months.

BNM Governor Zeti’s comments on Friday still indicate some confidence on the part of the central bank, but as we have mentioned several times previously, there are plenty of downside risks to growth prospects going forward.

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