Bank negara cuts OPR by half percentage point

KUALA LUMPUR: Worried about a growing risk of an economic contraction this year, Bank Negara has cut the overnight policy rate (OPR) by 50 basis points, or half a percentage point, to 2% as the global economy continues to deteriorate.
In a statement yesterday, the central bank announced the statutory reserve requirement (SRR) would also be cut from 2% to 1% from March 1 to reduce the cost to banks.


The ceiling and floor rates of the corridor for the OPR were correspondingly reduced to 2.25% and 1.75% respectively.
“The major advanced economies are experiencing a deepening economic contraction, while the regional economies are experiencing a rapid slowdown,’’ said Bank Negara in its monetary policy statement.
“The impact of the rapid decline in global demand on trade, production and investment activities in the Asian region has intensified.”
It said domestic economic conditions were expected to continue to remain challenging in the coming quarters with the continued deterioration of the global economy.
“While this has raised the risk of an economic contraction in 2009, the prospects remain intact for an economic recovery once global conditions stabilise given that the economy is not over-leveraged, the financial system remains sound, and the external position is healthy,’’ Bank Negara said.
The central bank said the turmoil in the international financial markets had also been protracted and that while a number of economies had put in place stimulus measures to manage the downturn, their impact on the economy had yet to take effect.
“The downside risks to the global economic outlook have increased significantly,’’ it added.
On Jan 21, Bank Negara cut the OPR by 75 basis points to 2.5% and slashed the SRR from 3.5% to 2%.
“This is the first time since the crisis erupted that the central bank has acknowledged the possibility of the economy registering a contraction this year,’’ said Maybank Investment Bank chief economist Suhaimi Illias.
“They are also reacting to the fourth quarter GDP number that will be released this week.’’
Bank Negara said the international economic and financial environment had deteriorated sharply in the recent quarter and that the Malaysian economy had been adversely impacted by these global developments.
“Exports and industrial production have declined steeply, while private investment activities have slowed down in recent months as businesses scaled back their spending. Consumer sentiment has also been affected by the weakening conditions in the labour market,’’ it said.
With inflation on a moderating trend, Bank Negara said the task of macroeconomic policy was to support domestic demand until conditions in the global economy show signs of normalisation.
“Further measures will be introduced to ensure continuous access to credit as well as to minimise the impact of the economic downturn on specific affected groups,’’ it said.
By The Star

Property market to rebound in two years

Rahim & Co: Sector likely to weaken further
KUALA LUMPUR: The property sector in the country is likely to weaken further amid worsening economic conditions with the market expected to rebound in two years, said property consultanty firm Rahim & Co Chartered Surveyors.
Executive chairman Datuk Abdul Rahim Rahman said people were getting more prudent with their spending, adopting a wait-and-see attitude that has resulted in the property market getting softer.
“(The price of) luxury condominiums in Kuala Lumpur City Centre (KLCC) for example are down 15% to 20 %,” he said. “Apart from that, the ongoing buildings development activities outside the central business district may push down the rental rate for offices when they are ready by 2010 - 2011 as a result of oversupply of office space.”
Abdul Rahim said he expected the Malaysian economy to recover in 12 to 16 months but the property market would take another two years to rebound after the economy recovered.
“This all will depend on the Government’s strategy and initiatives to strengthen the economy.
“We are not as bad as in 1997 when the property market needed 4-5 years to recover. “We believe this time around, the property market would be stable again within two years after economic recovery,” he said.
Savills Rahim & Co Real Estate Agents’ managing director Robert Ang said buyers were now asking for a yield guarantee from developers before buying properties.
“Last year, the yields were 4% to 5%. As the market weakens, buyers want guarantee from developers to give them higher yields at 6% to 7%,” he said.
He added that due to weak demand, some of the company’s clients were advised to defer their new launches, especially the higher-end projects, to the third quarter.
Nevertheless, the property sector remains relatively well supported at the moment, Rahim noted.
“Banks are still providing loans to buyers and developers. Apart from that, sellers are getting more flexible on pricing their properties.
“However, the demand is not as strong as before,” he said.
Rahim & Co will be organising a seminar called “Looking Beyond: Challenges & Opportunities In The Malaysian Property Market” on March 3 at Hotel Istana Kuala Lumpur.
The seminar will feature talks on the property market situation in the country by local and international speakers.
By The Star

Real estate sector still has upside despite downturn

REAL estate investors should look at the positive side during the current economic uncertainty, as there is still some upside in this sector, says MGPA Asia Developments chief executive officer Michael Wilkinson.
“Construction cost is now at a moderate rate and with careful selection of investment, we can still benefit,” he said during the launch of The Intermark, a fully integrated world class mixed-use development, yesterday. MGPA will invest RM2bil (including acquisition and construction costs) in The Intermark.
The amount involves the complete refurbishment of 62-storey landmark grade A office building Vista Tower (formerly known as Empire Tower), a new international grade A office building Integra Tower, retail centre Intermark Mall (formerly known as City Square) and Malaysia’s first Doubletree by Hilton Hotel.
MGPA - through it’s Asia Fund 2 - acquired the Empire Tower, City Square, the Crown Princess Hotel and Plaza Ampang in 2007 for about RM760mil.
Wilkinson says the reason to refurbish and build the grade A office buildings was because such buildings were limited in the city.
“Besides that, the location of the development - at the junction of Jalan Tun Razak and Jalan Ampang - is very strategic, just 500 metres from the Petronas Twin Towers and also about a two-minute walk to the Ampang Park LRT,” he says.
The company is comfortable with the investment in Malaysia and will be here for a long time, he says, adding: “In fact, we are looking for more investment opportunities in Malaysia and will announce that when the time comes.”
He says Malaysia was fortunate to be still resilient in the current climate and, with a strong market, the country was still attractive to investors.
Vista Tower is expected to be completed by year-end while the Intermark Mall and DoubleTree by Hilton Hotel will be completed in the first quarter next year. The other building, Integra Tower, is scheduled for completion by end-2012.
which is an independently managed private equity real estate investment advisory company.
By The Star