Malaysia rate cut bets grow as tariff talks weigh on outlook
Bank Negara Malaysia is expected to cut the overnight policy rate next week by 25 basis points to 2.75 per cent to preemptively support growth, analysts at HSBC Holdings and CIMB Group Holdings said in separate reports. Traders are pricing in a 40 per cent chance of a rate cut within the next three months, according to swaps data compiled by Bloomberg.
'We expect the cut to materialise largely as a means of pre-empting a potential slowdown in domestic demand,' analysts Yun Liu and Madhurima Nag from HSBC wrote in a Jun 25 note.
Private consumption may be impacted by the expansion of the sales and service tax and the government's plans to cut subsidies for the country's cheapest and most popular petrol, RON95, according to the HSBC analysts. The impact of the latter should be limited, however, as authorities aim to keep the majority of the population shielded, they added.
The government has already flagged it plans to revise down its 4.5 to 5.5 per cent growth target this year.
Malaysia's exports contracted by 1.1 per cent in May, with CIMB's Azri Azhar and Michelle Chia citing that decline as evidence of persistent tariff uncertainties, soft global demand and weakening trade sentiment.
It's unclear when Malaysia will reach a trade agreement with the US. South-east Asian neighbour Vietnam has reached an accord in which its goods will be subject to a 20 per cent tariff, according to US President Donald Trump.
Credit momentum is also showing signs of broad-based moderation, while signs of softness in private consumption are becoming more evident, the CIMB analysts wrote in a Jul 2 note. These all point to a cut in borrowing costs at the Jul 9 meeting, they said.
To be sure, the central bank may still delay any move. This would imply that additional data may be required, namely the advance gross domestic product figures for the second quarter and trade figures for June and July, according to CIMB. BLOOMBERG
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Business Times
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Singapore eyes breakthrough in landmark regional clean-power deal by October: EMA chief
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Electricity imports are a key strategy for Singapore in its goal to hit net-zero emissions by 2050. While the city-state is also studying alternative energy sources and technologies – such as geothermal power and carbon capture – these will need time to mature, Puah noted. 'Therefore, electricity imports – quite clearly already really feasible, as shown in Europe and many other regions around the world – is something that will be a key strategy for us in the short to medium term to decarbonise,' he said. Revenue support for imports Singapore aims to import 6 gigawatts (GW) of low-carbon electricity by 2035, accounting for about a third of its power demand then. EMA has thus far granted conditional licences to six projects importing clean energy from Indonesia – amounting to a total capacity of 3 GW. Another four projects, with a total capacity of 4.35 GW, have been granted conditional approvals. 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This would mean that EMA steps in as an offtaker, giving developers more certainty on their long-term revenue profile and lowering risk and financing costs. 'The project may last 20 to 30 years, and therefore, over this period they (need to) make sufficient returns to justify why shareholders are parting with their money. We understand that,' Puah said. He declined to disclose whether the import projects thus far have requested such revenue support, citing commercial confidentiality. He also noted that EMA will consider such support carefully. 'First, we have to think about the national interest. If we are entering into various support (agreements) with the importers… we are doing it on behalf of the overall energy sector. Therefore, we will make sure that we get a decent deal,' he said. 'Resilient' LNG market While Singapore is pushing for more renewable energy, the city-state is still reliant on liquefied natural gas (LNG) for 95 per cent of its power generation. 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'So we think that the supply of LNG will increase, and that is good for an LNG buyer like Singapore,' he said. Puah also highlighted that Singapore has introduced safeguards since the 2021 energy crisis, when several electricity retailers went bust. These measures include a temporary price cap to mitigate volatility in the wholesale electricity market, as well as more stringent requirements for electricity retailers in terms of paid-up capital and hedging. Another safeguard is the formation of a new centralised gas buyer, Gasco, which can buy fuel contracts of varying durations and contracts, as well as those tied to various price indices. This is so that 'if a particular price index were to shoot up, then maybe only some of my gas supplies are affected', Puah said. 'This diversification across geographies, markets (and) tenures will help to prevent (or) reduce the shock that we have in future if there's a spike in oil and gas prices,' he added. 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