• BNM, US FOMC, RBA and ECB are due to announce policy decision this week

• US April unemployment data is also due this week

• Lackluster trading momentum expected, holiday shorten week a dampener

It was a less-than-upbeat week for Bursa Malaysia last week which was largely expected due to holiday shortened week. Most funds managers were away which could also be the case this week amid 2 upcoming public holidays, Labour Day (1st May) and Wesak Day (4th May). Holiday trading closure has been a dampener on Bursa Malaysia amid its volume and value that shed by double-digits week-on-week last week. Will this recover this week? Given a flurry of key announcements in these two weeks, investor may choose to stay at the sideline particularly when the US will be announcing three key data including the Federal Funds rate – FFR (4th May; Thursday), April unemployment (5 th May; Friday) and April CPI (10th May; Wednesday). Investors will be watching with bated breath to see the impact of aggressive US interest rate increase on April CPI, which is projected to slip further to 5.4% in April from 5.6% in March. A larger-than-expected drop will spark a convincing rally, similarly if smaller-than-expected decrease will stoke a low risk taking. On the same vein, market watchers are expecting a small bump in FFR by 25 basis points to 5.25% on 4th May, a level not seen since 2007. A larger-than-expected increase will spook the market amid the US that is currently skirting a recession risk and therefore, global growth this year. Though likely but we water down the probability given the still simmering US banking crisis which could stoke another round of liquidity or solvency risks for banks. Note that the US FOMC is still negotiating with several lenders including JPMorgan Chase & Co and PNC Financial Services to submit bids for the embattled First Republic Bank. An aggressive increase in FFR may also push the US to fall off the cliff particularly with its less-than-upbeat growth projection of 1.2% this year (note: consensus), a marked moderation against 2022’s of 2.1%. Note that consensus is projecting a 65% recession risks on US this year. This is not even taking into account the expected rebound in oil price which could be the case from May onwards following OPEC+ surprise decision to widen the supply cut by 1.66mn bpd to 3.66mb bpd beginning May. The turnaround in oil price could hurt the US economy particularly with prolonged disruption in global oil market following protracted war between Russia-Ukraine.

BNM is also due to announce its latest decision on OPR this week, 3rd of May (Wednesday). Note that market consensus is projecting a status quo on OPR which is set to remain steady at 2.75%. If any, a normalization in OPR could take place only in 2H. BNM’s MPC is due to meet again in July. On that score, we foresee downside risks to Ringgit this week.

Source: BIMB Securities Research - 1 May 2023