CMTan » Economic Outlook

OCBC Bank sees more rate hikes

cmtan — Sat, 27 Mar 2010 03:29:44 +0000

KUALA LUMPUR: OCBC Bank expects two rounds of interest rate hike, each by 25 basis points, in the remaining nine months of this year, bringing the overnight policy rate to 2.75%.On March 3, Bank Negara raised interest rates by 25 basis points to 2.25%, the first since November 2005.

“We don’t think it (Bank Negara) is going to be very aggressive in terms of hiking rates. In fact, we don’t think interest rates will return to pre-crisis levels in 2010,” said OCBC Bank’s Singapore-based economist and head of treasury research Selena Ling.

“The market is expecting a 25 basis points hike in May,” she said at a press briefing here on the economic outlook for this year.

Meanwhile, Ling said an upside potential for Malaysia’s gross domestic product (GDP) this year was expected following the unveiling of the New Economic Model (NEM) next week.

“We are fairly confident as should there be liberalisation initiatives as far as attracting foreign direct investments and privatisation, I think that could mean some upside for Malaysia’s growth potential,” she said.

OCBC is projecting GDP growth to rebound to 5.4% this year and 5% in 2011.

Ling said the market anticipated the introduction of a goods and services tax, fuel subsidy cuts, reforms to the social system, a second wave of privatisation and a sovereign global bond issue in the near-term. – Bernama

Published: Saturday, March 27, 2010

Source: http://biz.thestar.com.my/news/story.asp?file=/2010/3/27/business/5946928&sec=business

Bank Negara Malaysia: Monetary Policy Statement

cmtan — Thu, 04 Mar 2010 03:34:17 +0000

At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to raise the Overnight Policy Rate (OPR) to 2.25 percent. The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 2 percent and 2.50 percent respectively.

The recovery in the global economy is progressing amidst continued policy support and improvements in financial conditions. Economic activity in the advanced economies has improved although growth is expected to remain modest. Emerging economies, however, are recording a stronger recovery. In particular, regional economies expanded strongly in the fourth quarter of 2009 and the growth momentum is expected to be sustained.

In the domestic economy, the stronger growth performance in the fourth quarter of 2009 affirms that the economic recovery is firmly established. Going forward, growth is expected to strengthen further, supported by domestic demand and continued improvement in external demand, particularly from the regional economies.

Prices will gradually increase during the year, reflecting the prevailing economic conditions and taking into account possible adjustments in administered prices. While external factors, including rising global commodity and food prices, may exert some additional upward pressure on domestic prices, inflation is expected to remain moderate in 2010.

The OPR was reduced to historic lows in early 2009 as a key measure to avert a severe and fundamental economic downturn. These conditions no longer prevail. The domestic economy has since improved significantly and is now on a path of recovery. Given this improved economic outlook, the MPC decided to adjust the OPR towards normalising monetary conditions and preventing the risk of financial imbalances that could undermine the economic recovery process. At the new level of the OPR, the stance of monetary policy continues to remain accommodative and supportive of economic growth.

Published by Bank Negara Malaysia on 4 March 2010

House buyers cautious due to fears of income security

cmtan — Tue, 26 Jan 2010 09:35:21 +0000

PETALING JAYA: Potential house buyers are still wary about making property purchases despite lower mortgage rates as the economic outlook remains uncertain, analysts said.

Average mortgage rates have fallen to about 3.5%, but at the same time banks have been more stringent on the approval of loans. The average mortgage rate is obtained from base lending rate (BLR) of 5.55% minus 1.5% to 2.4% for housing loans (or effective annual rates between 3.15% and 4.05%), depending on the amount and tenure of loans, and the package customers sign up for.

OSK Research said the attraction of lower mortgage rates had been superseded by fears of income security amid a deteriorating economic outlook.

“For those who are still financially sound, most would rather wait a while longer to snatch up better bargains a few more months down the road. Some are hoping for developers to come up with more creative and attractive perks and some are also waiting for prices to drop further, if any, before they are convinced to buy,” the OSK analyst told StarBiz.

The research house said downside risk for landed properties appeared limited compared to luxury condominiums, with the demand for landed properties expected to return by year-end.

“Most of the homebuyers in this segment are cash-rich and not highly leveraged. Given the accommodative interest rates today, any forced-selling or foreclosures of properties like the one we saw during the 1997/98 Asian Financial Crisis will be limited in this downcycle,” it said.

OSK Research expects the demand for luxury condominiums to decline by 30% to 40% in 2010 from 2008, with luxury condo prices already currently down by 15% to 20%.

An analyst from Kenanga Research agrees that the bearish economic outlook is making potential buyers hesitant about buying properties now.

“What if this (sign of market recovery) is just one-off data? What we need is for the sentiment to improve,” she said, noting that only 60% of bookings had been translated to actual sales compared to almost 100% previously due to more stringent loan requirements.

Jupiter Securities Sdn Bhd head of research Pong Teng Siew said that with the mortgage rates of 3.5% and effective cost of funds of 1.5%, banks net interest margin should be about 2% now.

“But cost of funds for smaller banks such as EON Capital Bhd, RHB Capital Bhd, AMMB Holdings Bhd are higher (slightly over 2%) because of higher interest bearing liabilities,” he told StarBiz.

A house buyer contacted by StarBiz said his current mortgage loan interest rate was 3.15% for the first two years and 3.45% for the remaining tenure.

He recently signed up for a 20-year conventional home loan from Alliance Bank Malaysia Bhd for the purchase of a double-storey house.

He is paying about RM1,700 per month for his RM300,000 loan.

His loan package included a one-time payment of RM2,500 for mortgage reducing term assurance, legal fees and stamp duty.

Other banks are offering similar mortgage rates.

For example, RHB Bank is charging BLR minus 2.1% for housing loans that range from RM250,001 to RM500,000, while Hong Leong Bank Bhd is offering BLR minus 2.2% for a RM300,000 mortgage loan.

Malayan Banking Bhd uses a property’s location as one of the criteria to determine interest rate, but is still offering rates in the region of BLR minus 2%.

All these banks have BLR of 5.55%.

Article: By K.C. LAW

Source: http://biz.thestar.com.my/news/story.asp?file=/2009/4/29/business/3793031&sec=business