Malaysia: Improvement in macro stability parameters - ANZ

In view of analysts at ANZ, there has been an improvement in Malaysia's macro stability parameters, encompassing a range of inter-related parameters that include the savings rate, current account balance, household leverage and the fiscal position.

Key Quotes

“The improvement has come about, despite a period of growing external headwinds, because Malaysian policymakers have resisted reflationary policies, apart from a single 25bp reduction in the Overnight Policy Rate (OPR) which was made in May this year.”

“The improvement in stability parameters is largely confined to Q1 2019 and may well prove to be tentative. Even so, it is a positive development to the extent that foreign investor interest in Malaysian assets has waned over the last year or so.”

“On a FX-hedged basis, we see scope for MYR bonds to return 2.9% in the next six months, outperforming many regional peers. We also illustrate that MYR bonds offer higher Sharpe ratios when hedged.”

“While the latest economic data do not yet justify a deeper rate-cutting cycle in Malaysia, Bank Negara Malaysia (BNM) has kept the door open to further easing in the event of increased external headwinds.”