Fed cut to boost Malaysia markets

19 Jul 2019

As investors expect that the Fed will be lowering interest rates at the end of the month, Standard Chartered Bank Malaysia Bhd. reported that Bursa Malaysia will be gaining from such cuts. 

Firms estimated that by the end of 2019, there is almost a 100% possibility for a single Fed rate cut and a 93% chance for two. Danny Chang, head of Managed Investments and Products Management, explained ‘Historically, when there is a US Fed rate cut which will not lead to a recession in the country, which is what we expect, it will be good for emerging equity markets, including Bursa Malaysia.’ He also noted that North Asian countries are more likely to see their markets gain before Malaysia, having higher local stock markets.

Chang added, ‘It is not the government’s policies or political risks that affect the Bursa Malaysia, but the local equity market is still expensive compared with others.’ 

He also elaborated on how Standard Chartered believes that Malaysia’s central bank, Bank Negara Malaysia will remain the same rates at 3.00. He said, ‘The economy is not slowing to a level where the central bank has to do another immediate rate cut after 25 basis points cut in May this year.’ The Overnight Policy Rate would be lowered only if there would be low inflation.