CGS-CIMB SEES LESS NEED FOR BNM'S HEAVY-HANDED APPROACH TO CUT OPR

By Siti Radziah Hamzah

KUALA LUMPUR, Jan 20  -- CGS-CIMB Securities Sdn Bhd foresees less need for a heavy-handed approach by Bank Negara Malaysia (BNM) to cut the overnight policy rate (OPR) currently due to the availability of non-monetary support such as the PERMAI assistance package.

In a research note today, the brokerage firm said the estimated daily loss during the Second Movement Control Order (MCO 2.0) is significantly less severe than the RM2.4 billion incurred from March to May 2020, which saw the central bank cut the OPR aggressively by 125 basis points between January and July 2020.

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However, it said the Malaysian economy might have to continue operating under the MCO 2.0 restrictions for a protracted period reinforced by comments from the Ministry of Health director-general Tan Sri Dr Noor Hisham Abdullah that the daily COVID-19 infection rates could reach 8,000 by the third week of March.

CGS-CIMB Securities said it has adjusted its end-2021 OPR forecast to 1.50 per cent as it foresaw BNM reducing the OPR by another 25 basis points in the first half of this year.

“Should the growth outlook continue to falter, BNM may be pressed into easing the monetary policy again,” it said.

Axi chief global market strategist Stephen Innes said it is unlikely that BNM would cut OPR when other central banks were now discussing when to pull back on accommodation.

“BNM views the effect of the first quarter lockdown as much less severe than the first MCO as business and consumers have better adapted to the lockdown situations,” he told Bernama.

He said the COVID-19 vaccine would be a game-changer for economic recovery and the optimistic view was that the broader restriction and wider reopening would occur before the so-called “Spring Break” when the curve is flattened and the most at risk get vaccinated.

UOB Malaysia senior economist Julia Goh said BNM was in a “wait-and-see” mode and expected a high chance that the current MCO 2.0 could be extended.

She said the tighter MCO has also been expanded to almost the whole nation, except for Sarawak, since late last week.

“Given the possibility of further extension of the current containment measures and potential downside risks, we maintain our view for a 25-basis-point OPR cut to a new low of 1.50 per cent in the first quarter of 2021,” Goh added.

The central bank has maintained the OPR at 1.75 per cent following the Monetary Policy Committee meeting today as it sees continued recovery in the global economy although downside risks remained amid uncertainties surrounding the COVID-19 pandemic.

BNM also maintained its Statutory Reserve Requirement ratio at two per cent.

-- BERNAMA