KUALA LUMPUR: Standard Chartered views the unchanged overnight policy rate (OPR) of 3.25 per cent by Bank Negara Malaysia would be beneficial for the Malaysian economy as it enters a globally volatile second half of the year.
Its head of managed investment and product management, Danny Chang said as the Dollar cools off towards the end of the year, the unchanged OPR will help to bring in local and international investors alike.
"From our point of view, local equities look attractive from a dividend yield perspective, they are also trading at premium valuations versus Asian stocks,” he said at the Standard Chartered H2 Global Market Outlook earlier today.
"As the Dollar weakened towards the end of the year, an unchanged OPR will be beneficial as it paints a picture of stability for investors,” he said.
Chang believes the newly elected government has the capabilities in reversing the RM1 trillion fiscal deficit.
He noted that both Prime Minister Tun Mahathir Mohamad and Finance Minister Lim Guan Eng had done these reversals before, at different points in time.
“If we look back, Dr Mahathir reversed the budget deficit to chunks of budget surplus during the 1990 Asian Financial Crisis. Lim had also done it in Penang, back when he was the Chief Minister on two separate occasion,” said Chang.
“Yes, the enlarged fiscal deficit is something that investors are closely following but I also believes that investors have factored in the experience both Dr Mahathir and Lim in facing this type of situation before.”
Chang added that the government will have to be more transparent on its stance on the nation's fiscal deficit and what policymakers will do to manage it, even as ongoing structural changes are positively viewed by foreign investors.
“However, local political uncertainties have very little impact on the market. We saw this in the lead up to the 14th General Election and even after that,” he said.
“Despite the political noises, market was performing. What is important to us is the US dollar has more significant impact on foreign flows and market performance,” he said.