Global Unease After Brexit Triggers Malaysia's Central Bank To Cut Lending Rate

By Azizul Ahmad and S. Joan Santani KUALA LUMPUR, July 14 (Bernama) -- The global unease after the 'Britain exit' (Brexit) referendum has triggered Bank Negara Malaysia (BNM or Malaysia's Central Bank) to cut the lending rate by 25 basis points to three per cent, said OCBC Bank Economist, Treasury Research and Strategy, Global Treasury, Wellian Wiranto. He said now, having surprised the market with the cut, BNM has invited the question of whether it was going for further rate reduction. "Given the tone of its statement, the chance of further rate cut is inescapably there," he said in a statement on Wednesday. Wiranto said OCBC will adopt a wait-and-see attitude on BNM's meeting on Sept 7, 2016 to gauge whether the hit to global economy was really as bad as the bank thought. "If things do turn out to be as unfavourable as it fears, it may cut the rate again at the meeting on Nov 23, 2016, especially if the release of the gross domestic product figure on Nov 11 proves to be sub-par," he said. Bank Islam Malaysia Bhd Chief Economist, Dr Mohd Afzanizam Abdul Rashid, said BNM has frontloaded such a move to reduce the overnight policy rate (OPR) further in the coming meeting and it would want to see how the monetary policy transmission would take shape in the real economy. "Experience in the developed world suggests that excessive monetary accommodation will not guarantee success. "Therefore, this would be the guiding principle for the central bank for further easing in the future," he told Bernama. Afzanizam said the key rate cut should help ease the cost of capital among the businesses. "We reckoned there are industries who would want to maintain their capital expenditure such as healthcare, rubber gloves and construction sectors, as such the OPR cut would reduce the financing costs and stimulate the economic activities," he said. Although the external sector remained uncertain, Afzanizam said, the latest developments in the UK, Japan and favourable economic data in US could suggest that they may help improve market sentiments. "This would be a necessary condition for a stable global growth as well," he said. Mah Sing Group Managing Director/Group Chief Executive, Leong Hoy Kum, said the rate cut would likely have a positive impact on house buyers as they could now invest in appreciating assets while enjoying low monthly repayments. "We think this will benefit Mah Sing, especially since we have several launches in the second half of 2016, among them, Lakeville Residence and Cerrado in Southville City in Selangor state, Ferringhi Residence 2 in Penang island (north Malaysia) and Bandar Meridin East in southern state Johor," he said. The OPR cut would boost home ownership for Malaysians and Mah Sing hoped to see more economically-friendly and positive measures from the Federal government, especially in the coming budget, he said. "Hopefully, there will be more measures to ease the burdens of first-time home buyers," said Leong. --BERNAMA