8 September, KUALA LUMPUR – Principal Asset Management Bhd (Principal) expects Bank Negara Malaysia (BNM) to cut the overnight policy rate (OPR) by another 25 basis points (bps) by year-end.
Chief executive officer Munirah Khairuddin said the central bank would remain accommodative to spur market investment and to boost local consumption.
She said this stance would likely be prolonged for the next three years as a way to ensure the economy is recovering across all sectors and back on a stronger footing post-COVID-19 pandemic.
“There are segments more affected than others like the small and medium enterprises.
“In addition, we haven’t seen the real effect of post-moratorium (to the economy). I think BNM will be very cautious,” she told reporters on the sidelines of the Principal 2020 Global Summit here, today.
The policymakers will meet on Thursday before holding the last meeting on Nov 3.
The central bank has already delivered a cumulative 125 bps cut at the last four meetings, taking the key policy rate below the all-time low of 2.0 per cent set during the 2008-2009 global financial crisis.
Munirah said the lower interest rate would continue to attract investors that are hungry for yield and this would continue to support the equities.
She said the local market saw a significant pick up in investors’ appetite, be it is institutional, corporate or even retail, largely driven by the surge for yield.
“With such low interest rate at the moment, money is looking for a home so we could see flows coming in quite strongly, starting from July.
“Retail participation in the stock market jumped about 30 times, but real money like institutional and corporate money will continue to be there,” she said.
Meanwhile, chief investment officer Patrick Chang said the Malaysian equity market has been the biggest outperformer in ASEAN year-to-date, declining by only 6.0 per cent compared with its regional peers such as Thailand (-22 per cent), Indonesia (-25 per cent), and Singapore (-22 per cent).
“Unlike others, the biggest driver of the key index KLCI has been the massive one in a lifetime pandemic, COVID-19, therefore that’s driven the healthcare sector even though there were other positive elements like earnings,” he said.
Nevertheless, Chang opined, as investors go in towards year-end, they would price in other factors including vaccine which will likely influence them to start taking money off the table, thereby impacting sectors like healthcare.
“Where we are today is where the market should be but on a worst case basis (if) we do get a more meaningful selloff in the healthcare sector or the glove (stocks) then we should see the index hovering, about another 5.0 to 8.0 per cent lower from where we are today,” he said.