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Economics & Strategy

All ears on three major official announcements by DPM, Bank Negara and NEAC

 


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ECONOMICS & STRATEGY
(for the week of 23-27 March 1998)


All ears on three major official announcements by DPM, Bank Negara and NEAC

In Parliament tomorrow, DPM Anwar Ibrahim will table his second post-Budget stimuli to boost sluggish economic recovery. The first announced in Dec 5 last year, prescribed austerity measures to rein in expenses, the second is expected to be less restrictive in nature. While current GDP growth projection of 4-5% looks untenable under the present scenario, a revised target of 2-3% will not come as news to the market. What may surprise, however, are cards that are still held close to his chest. Some concessions within the financial sector (insurance and securities industry) are expected. The market generally is still kept guessing, but the underlying tone is one of optimism.

Last week, Anwar softened the government stance on big-scale infrastructure developments, by allowing the staggered construction of the RM3b East Coast Expressway. Is this a departure from the norm of deferring big-ticket developments? We think this a subtle change of official policy, rather than an ad-hoc announcement aimed at uplifting the controversies surrounding two of the partners in the expressway consortium. The project was awarded to a tripartite venture comprising United Engineers, Malaysian Mining Corporation and MTD Capital in 1996. It may be ironic that the former two were the focus of recent unforgiving public scrutiny, but we still expect the market to respond positively to these stocks.

Anwar's announcement is also expected to accommodate "suggestions" by Daim Zainuddin, the executive director of National Economic Advisory Council. Among others, Anwar can be expected to review that state of corporate finance activities since the harsh measures of Dec 5 last year that froze corporate restructurings by public-listed companies. That move is now being viewed with disdain by the NEAC as bordering regulatory impotency. Among others, we expect the government to relax conditions on corporate exercises, including allowing cash calls on shareholders (now that it is harder to access funds from banks).

Bank Negara Annual Report 1997: The banking sector's health has been of much interest recently and questions will be answered in many ways when Bank Negara releases its Annual Report 1997 on Wednesday. There will be a press briefing scheduled on Tuesday pre-conditioned on 24-hour publication embargo. How the market reacts on Tuesday will provide good inklings on the governor's address on monetary policy of the day. The central bank's balance sheet will be scrutinised, as the consequences of failed attempts to prop the ringgit last year shows up. But the market would be looking for a whiff of any sign of an aggressive expansionary moves. This comes in the light of rumoured relaxation on liquid assets maintenance (as a percentage of eligible liabilities). Also, expects a briefing on industry consolidation, particularly among finance companies and banking mergers.

The Unlucky 13? The New Sunday Times alluded to the existence of a list of major loan defaulters that include prominent businessmen in the country. The "casualties" are said to be facing civil suits purported brought against them by Singaporean banks. The significance of this news is that Malaysian banks will have no option but to jump onto the same bandwagon and sue, but this cannot be further than the truth. Our information points to no more than a mischievious poison letter.

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