AmWatch - EconWatch : OPR remains at 3.0% since May 2011, 7 Mar 2014

FOCUS OF THE DAY

EconWatch : OPR remains at 3.0% since May 2011

BNM kept the Overnight Policy Rate (OPR) at 3.00% yesterday, which was in line with both our and consensus expectations. BNM highlighted that growth momentum will benefit from improvements in the external sector.  Meanwhile, BNM anticipates higher prices in the coming months. In 2013, inflation grew by 2.1%. This was primarily driven by higher transport cost during the final quarter of the year.However, domestic growth is expected to soften in 1H14 as recent indicators suggest emerging signs of slowdown in private consumption. The contribution of aggregate domestic demand to GDP surged to 93.1% in 2013 from 82.5% in 2008. As for 2014, we envisage aggregate domestic demand to grow by 4.7%, accounting for 92.8% of total GDP.However, the slowdown in domestic growth will be compensated by improvements in net trades. As a component of real GDP, we expect overall net trades to advance by 30.7% (or +RM15.2bil) to RM64.6bil in 2014.Net trades will likely revert to positive growth contribution in 2014 after registering negative contribution for seven consecutive years. We note that overall net trades will probably account for 1.8ppt in contribution to GDP growth in 2014 (2013: -2.0ppt). Given the current economic climate, BNM will likely hold interest rate at the prevailing level in 1H14 while assessing the overall impact of the recent and forthcoming cuts in subsidy. No change to our year-end interest rate projection of 3.25% for Malaysia.

Others :

Star Publications : Continues to diversify, but print to remain weak          HOLD

NEWS HIGHLIGHTS

Malaysia Airports Holdings : Klia2 likely to miss deadline again

DiGi.Com : RM900mil plan to boost coverage, but non-committal on P1 buy

Telekom Malaysia : Billion-ringgit undersea cable project

AirAsia Bhd : India unit aims to start operations in May

Petroliam Nasional : Bags two contracts to supply LNG

Plantation Sector : Wilmar assures Sarawak it will continue to buy crude palm oil

Water Sector : Water concessionaires’ licences for raw water abstraction won’t be renewed

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