Bank Negara Makes Pre-Emptive Cut
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23 January 2020
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At its meeting yesterday, Bank Negara’s Monetary Policy Committee (MPC) cut the OPR by 25bps to 2.75%.

The cut was somewhat unexpected. The majority of economists and investors were expecting that an interest rate cut will only take place the earliest in March 2020. The MPC highlighted that the latest economic data point to a moderate GDP growth in the 4Q’19.

However, downside risks remain. These include geopolitical risks, heightened financial market volatility as well as domestic factors, such as the weakness in commodity-related sectors and delays in the implementation of projects.

According to Bank Negara, the adjustment to the OPR “is a pre-emptive measure to secure the improving growth trajectory amid price stability”.

Based on the aforesaid statement and the gradually improving economic outlook, we expect the OPR to remain at 2.75% for the rest of the year. We expect the GDP growth for 2020 to fall between 4% to 4.5% (9M2019 : 4.6%) and inflation to fall between 1.5% to 2% (2019: 0.7%).

We believe the rate cut is positive for domestic bonds, especially the corporate bond space. The decline in yields on a YTD basis has been lagging behind government bonds which have somewhat priced in the OPR cut.

We are overweight corporate bonds on the expectations that spreads will tighten as investors switch into corporate bond space for a yield enhancement.
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TENG CHEE WAI

Managing Director
Teng Chee Wai is the founder of Affin Hwang Asset Management Berhad (Affin Hwang AM). Over the past decade, he has built the Company to be the fastest growing and only independent investment management house in Malaysia’s top three, with an excess of RM47 billion in assets under management as at 31 December 2018.​

​In his capacity as Managing Director / Executive Director, Teng manages the overall business and strategic direction as well as the management of the investment team. His hands-on approach sees him actively involved in investments, product development and marketing. Teng’s critical leadership and regular participation in reviewing and assessing strategies and performance has been pivotal in allowing the Company to successfully navigate the economically turbulent decade.

Teng’s investment management experience spans more than 20 years, and his key area of expertise is in managing absolute return mandates for insurance assets and investment-linked funds in both Singapore and Malaysia. Prior to his current appointments, he was the Assistant General Manager (Investment) of Overseas Assurance Corporation (OAC) and was responsible for the investment function of the Group Overseas Assurance Corporation Ltd.​

​Teng began his career in the financial industry as an Investment Manager with NTUC Income, Singapore. He is a Bachelor of Science graduate from the National University of Singapore and has a Post-Graduate Diploma in Actuarial Studies from City University in London.
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