Bank Negara Malaysia’s (BNM) Governor Tan Sri Dr Zeti Akhtar Aziz said that interest rate policy should be based on the outlook for inflation and growth. “We need to assess this very carefully in deciding the future direction. There should not be an overreaction and over-adjustment because this would result in an over-adjustment in the economy,” she said. “Right now, we have a moderation in the rate of inflation. We have interest rates at a point where they are accommodative. At this point in time, I believe that unless inflation does begin to again rise, it does not merit consideration of raising rates.” The central bank does not see a need to revise 2012’s GDP growth at this point of time as that 4-5% is mainly driven by domestic demand. BNM already priced in the prospect of significantly lower export growth, she said. BNM’s 2012 inflation estimate of 2-3% is intact. The only risk to that range of inflation is commodity prices, she said. On risk concerns over rising property prices and household debt, Zeti said BNM has already put in place pre-emptive, wide-ranging measures to address this issue. Zeti also said that there is no need for the central bank to ask lenders to set aside more reserves against property lending at this point as banks are well-positioned to withstand any set-back in terms of growth or volatility. (Bloomberg)
Bank Negara Malaysia’s (BNM) Governor Tan Sri Dr Zeti Akhtar Aziz warned that Greece exiting the euro would have “unimaginable” consequences for Europe and that she expects a solution will be reached to prevent a departure. Measures to prevent a Greek departure from the common currency should also be accompanied by a plan to boost growth in the region, Zeti said. “Structural adjustments” being imposed in Greece and on other economies such as fiscal austerity need to be done gradually, she said. “The worst-case scenario is what we saw in Asia when one economy collapses, the market usually goes on to focus on the next one, and there will be contagion that will affect different countries probably that don’t deserve those kinds of consequences,” Zeti said. Growth prospects for Asian nations may falter as Greece’s failure to form a government could reverse progress made in resolving Europe’s debt turmoil, with a China slowdown and an uneven US recovery adding to risks. (BT)
Malaysia and Australia will sign a free trade agreement (MAFTA) in Malaysia next Tuesday. It will be Malaysia's sixth bilateral FTA. MAFTA was successfully concluded on 30 Mar 2012. (Bernama)
Bank Negara Malaysia has signed a Memorandum of Understanding (MoU) with the Central Bank of the Republic of Turkey to foster strategic cooperation between both countries. The MoU is also aimed at promoting bilateral investments and liquidity arrangements, to support the development of the financial services sector in both countries, and enhance economic and financial linkages. It includes building the required financial infrastructure, payments and settlements arrangements to facilitate bilateral trade in the respective local currencies of the two countries. (Bernama)
Europe's debt crisis, higher oil prices and the year-end budget cuts and tax increases still remain risks to the US economy, Treasury Secretary Timothy Geithner said, adding that raising the debt ceiling “does not have to be a crisis” as it was last year. He also reiterated that the US “can’t afford” to extend the Bush-era tax cuts for the upper-income when they expire later this year. (Reuters, WSJ)
The size of the US commercial paper market grew by US$27.2bn to US$993.6bn on a seasonally adjusted basis in the week ended 16 May from a seasonally adjusted US$966.4bn outstanding a week earlier, the third straight week of increase. (Reuters)
US jobless claims were unchanged in the 12 May week at 370,000, the third consecutive week of improvement. The four-week moving average eased to 375,000 from a revised 379,750 in the earlier week. (Bloomberg)
US leading indicators fell 0.1% mom in Apr (+0.3% in Mar), exactly the opposite of consensus expectations of a 0.1% gain. (Bloomberg)
US factory activity in the mid-Atlantic region unexpectedly contracted in May to its weakest in eight months as new orders and employment measures slowed.The Philadelphia Federal Reserve Bank said its business activity index dropped to minus 5.8 from positive 8.5 in Apr. The reading was the lowest since Sep 2011 and missed consensus forecasts for a positive reading of 10. (Bloomberg)
US foreclosure filings fell to a five year low in Apr totalling 188,780, down 14% yoy and 5% mom, according to RealtyTrac Inc. It was the lowest tally since Jul 2007. Meanwhile, the mortgage delinquency rate fell in the first quarter to 7.4%, the lowest level in more than three years, the Mortgage Bankers Association said (Bloomberg)
Japan’s economy grew 1.0% qoq in 1Q12 (a revised 0.0% in 4Q11) on account of rising domestic demand and a boost in exports, exceeding expectations for a 0.9% rise. On an annualised basis, the measure grew 4.1% (a revised 0.1% in 4Q11), also exceeding the median estimate of a 3.5% growth. (AFP)
Japanese banks’ new loans for housing grew 10.0% yoy in 1Q12 (2.9% in 4Q11), whilst new loans for the purchase of consumer goods and services grew 16.4% yoy in 1Q12 (19.3% in 4Q11). (Bloomberg)
Japanese capacity utilisation grew 1.3% mom in Mar (-1.7% in the earlier estimate), whilst industrial production grew 14.2% yoy (13.9% in the earlier estimate). Machine tool orders grew 0.4% yoy in Apr (0.5% in the earlier estimate). (Bloomberg)
Singapore’s non-oil domestic exports rose 8.3% yoy in Apr (-4.3% in Mar), faster than the 5.9% growth predicted by analysts on the back of stronger performances from petrochemicals and pharmaceuticals. Electronic exports grew 1.0% yoy (2.8% in Mar), a quarter of the 4.0% expected by economists. (Bloomberg)
Singapore GDP grew 10.0% qoq in 1Q12 (9.9% in 4Q11), close to expectations of a 10.6% rise. On a yoy basis, the measure grew 1.6%, matching 4Q11 but falling short of analysts’ forecast of a 1.8% rise. (Bloomberg)
Singapore stuck to its economic growth projections of 1-3% for 2012 but warned there was a chance of a "disorderly sovereign debt default" in the eurozone that could hit exports. (AFP)
South Korea is prepared to take “prompt” action to stabilize markets “with a comprehensive action plan” should it be needed as Europe’s sovereign debt crisis deepens, vice finance minister Shin Je Yoon said. (Bloomberg)
India's economic growth story is intact and the current account deficit under control, senior Finance Ministry officials told a team from Fitch Ratings, weeks after Standard & Poor's (S&P) cut its outlook for Asia's third largest economy. (Reuters)
The Thai industries sentiment index went up to 104.0 in Apr (102.1 in Mar), the third straight month of increase, according to the Federation of Thai Industries. (Bangkok Post)
Thai car exports rose 6.21% yoy in Apr to 55,433 units but was down 38.28% mom with the export value for the month standing at THB26.52bn, an increase of 14.29% yoy. (Bangkok Post)
Thailand’s Board of Investment revealed that 407 investment projects, worth THB155bn altogether, have been carried out in Thailand by foreign investors during the first four months of 2012. (Thai Financial Post)
The Bangko Sentral ng Pilipinas reported that the net inflow of foreign portfolio investments reached US$333.43m in Apr, falling by 51% yoy from the US$673.8m reported in the same month last year as global risk aversion rose. (Business Inquirer)
The Philippines can still attain its 2012 growth target of 5-6% and improve its medium- to long-term growth potential to 7-8% per year, according to new National Economic and Development Authority head Arsenio M. Balisacan. (Business Inquirer)
US President Barack Obama extended US sanctions against Myanmar, warning that despite progress on human rights and governmental reform, a political opening in the country remained "nascent." (Bangkok Post)
Greece’s credit rating was downgraded one level to CCC from B- by Fitch Ratings on concerns the country won’t be able to muster the political support needed to sustain its membership in the euro area. (Bloomberg)
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