General market tone: Wait and watch.
Investors will likely stay defensive on Tuesday, awaiting fresh developments on the US-China trade front.
We believe that the central bank (BNM) considers the economic risks to be fairly balanced between growth and inflation and that it will keep monetary policy on hold this year
Released today, Malaysia’s industrial production grew more than expected by 3.4% year-on-year in December, up from 2.6% growth in November (revised from 2.5%). The outcome was slightly short of our 3.5% growth forecast but way better than 2.7% consensus estimate. Our above-consensus estimate relied on firmer exports, especially electronics exports which have held up well in the face of a slowdown elsewhere in the region (Korea, Taiwan, Singapore).
Among the other activity indicators released alongside the production data, manufacturing sales growth eased slightly (7.5% in December vs. 7.7% in November) and employment growth slowed too (1.7% vs. 2.0%), yet salaries improved (10.1% vs. 9.0%).
Chinese markets reopened to the worst post-Lunar New Year start in more than a decade amid reports of two local borrowers defaulting on their debt obligations and the yuan playing catch-up with the emerging market currency selloff over the holiday. The sentiments may not get any better ahead of the upcoming US-China trade negotiations