Everyone especially households and business owners are waiting to see if Bank Negara Malaysia at its Monetary Policy Committee (MPC) meeting today will trim OPR further to stimulate growth in current economic tough times. Well, lower interest rates will ease the debt burdens on companies and consumers.

It is not surprising when BNM announce the cut of OPR today, mark our Bank Negara Malaysia’s 4th policy easing this year, a period in which the economy has faced a triple whammy of coronavirus pandemic, low oil prices and political uncertainty. 

What about other country? 

• England: cut to  0.1%  (https://www.bbc.com/news/business-51962982)
• US : Cut  to 0.25%  (https://tradingeconomics.com/united-states/interest-rate)

I did a overview of the interest rate cut this year as below. ​

Source: ​

• https://www.theedgemarkets.com/article/bnm-cuts-opr-25bps-175
• https://www.thestar.com.my/business/business-news/2020/07/07/malaysia-set-to-cut-opr-to-record-low

According to The STAR on 7 July 2020, the decision to reduce the OPR is aimed at accelerating the rate of recovery and further stimulate the country's economy.  Another way it means to help the economy recover because it supports consumption and investment spending.

"The government believes that this move, combined with proactive measures deployed since March 2020 under the PRIHATIN and PRIHATIN SME+ economic stimulus packages and, more recently the National Economic Recovery Plan (PENJANA), will be able to regenerate the economy by creating jobs, restoring consumer and investor confidence, as well as containing the likelihood of a sharp economic contraction,

Malaysia ringgit’s weakening also means that goods from overseas will be more expensive. This can potentially affect the country’s economic growth, as many of Malaysia’s projects designed to spur growth are dependent on imports such as highly sophisticated machinery, construction materials, foreign consultant services etc. ​

When the country experiences strong economic growth, the central bank will consider higher OPRs to discourage overspending as the latter might lead to increased inflation for the country as a whole. 

The higher lending rates that come with increased OPRs will also mean higher interest rates that attract savings in the banks, discourage indiscriminate borrowing and encourages responsible spending.

Alternatively, when the economy is generally found to be slowing the central bank will then consider lower OPR bands to encourage domestic spending, and help GDP growth. 
​
This has been used effectively in large economies to spur economic growth, for example in the US, where rates reach 0% with direct liquidity injections conducted through quantitative easing to support the local economy.

1. Do you want an investment that offers a steady cash flow & yet provide stability (lower risk fund) ?
2. Do you have any Fixed deposit going to due?  
3. Do you put all your savings in bank/FD? 
4. Do you aware with the lower saving/FD rates offered by bank after the 4th cut in OPR?

Our china funds are mainly invested in 'H' Share all this while for intance: Public Greater China Fund, Public China Ittikal Fund, Public China Titan Fund.  

I want to highlight one thing here:
so basically, Public China Access Equity Fund Concentrated in large-capitalization stocks listed on the China A-share market whereas Public Mutual’ s Other China Funds Largely focus on H-shares market &  Also invest in Hong Kong and Taiwan stocks.

What you think about 'A' Share fund? 

China incorporated companies listed in the People’s Republic of China (PRC) can issue different classes of share depending on where they are listed and which investors are allowed to own them. The classes are A, B and H, which are all renminbi-denominated shares but traded in different currencies, depending on where they are listed.

​Publicly traded companies in China generally fall under three share categories:

• A Share - A Shares are securities of Chinese incorporated companies that trade on either the Shanghai or Shenzhen stock exchanges. They are traded in Renminbi (Chinese Yuan). They can only be traded by residents of the People’s Republic of China or under the Qualified Foreign Institutional Investor (QFII), the Renminbi Qualified Foreign Institutional Investor (RQFII) rules, or via the Stock Connect programs.
• H Share -H Shares are securities of companies incorporated in the People’s Republic of China that trade on the Hong Kong Stock Exchange. They are traded in Hong Kong dollars. Like other securities trading on the Hong Kong Stock Exchange, there are no restrictions on who can trade H Shares. 

To achieve capital growth over the medium to long term period by investing in a portfolio of investments in the China market and including China-based companies* listed on domestic and foreign markets.  ​

Below is our China fund comparison: 

This Fund is suitable for medium to long-term investors who are able to withstand ups and downs of the stock market in pursuit of capital growth​. 

Graph shown the Historical Interest Rate in Malaysia: 

7 JULY 2020:  Bank Negara cuts overnight policy rate by 25bps to 1.75% ​

• Lower Returns for savings & Fixed Deposits. 
• Lower Loan interest rate. Whether it’s a car loan, personal loan, credit cards or home loan, you will benefit from the OPR reduction. For example, if your mortgage loan is pegged to the BLR/BFR, the OPR reduction will lead to a lower mortgage interest rate, which means that you’ll be paying lower monthly repayments.

BLR is the rate that is determined by conventional banks based on the cost of lending to consumers. 
​BFR is a rate determined by Islamic banks based on the cost of lending to consumers.

(CASH STUDY)
​Here’s an example of how this works if OPR cut 0.25% 
Loan amount : RM500,000
Loan tenure: 30 years
BR: 3.65%           BR: 3.65% – 0.25%= 3.40% 
Home loan interest rate
Before: 
4.45% (3.65% + 0.80%)
Monthly repayment : RM2,518.59
Total interest paid over 30 years : RM406,693

After OPR cut: 
4.20% (3.40% + 0.80%)
Monthly repayment:  RM2,445.09
Total interest paid over 30 years  : RM380,232.40

1. 0.25% reduction will result in RM26,460.60 savings over a 30-year loan tenure.
2. RM73.50 reduction in their monthly repayment. 
3. Over the loan period, you can see a savings of 6% and a monthly savings of close to 3%​ ​

Below is the latest Fixed Deposit rate after OPR cut as your reference 

I would highlight some important point from today The Star. 

Procrastination is one of the mankind's biggest weaknesses. But in the world of finance, procrastination can result in an opportunity loss to mitigate risk and in growing wealth – sometimes an opportunity which can never be recovered. After all, it takes time for any investment to compound into a significant figure

Highlight some of the common reasons people use to put off taking actions on their financial matters.

1. I Don’t have enough time to plan and invest. 
2. Later is a concept that is never ending. 
3. I don’t have enough money to plan and invest”. Most people don’t realise it, but having enough money is a matter of perspective. If you don’t have enough money to invest when you’re earning RM5,000 a month, do you think you will have enough to invest when you’re earning RM50,000 a month? Believe it or not, I have met several people earning around RM50,000 or more per month and still lament about not having enough to save and invest.
4. We always think along the lines of “if only we make more money”, but once we actually start making more money, our expenses and lifestyle will also go up a notch. So, if you’re waiting for a time when you feel you have enough money to save and invest, that time will never come.
5.  I don’t really need to invest. This fallacy of not needing to invest stems from the fact that when they retire someday, they will have their EPF savings to rely on. Technically, if you are earning a comfortable amount and do not make any EPF withdrawals before you retire, you may be right in thinking this. However, this is hardly the case. EPF has reported that more than two-thirds (68%) of EPF members aged 54 had less than RM50,000 in EPF savings, while only 18% of its members had the minimum savings target of RM240,000 in their account by 55. This amounts to a monthly withdrawal of RM1,000 to cover basic needs for 20 years – sufficient if you want to live a basic retirement lifestyle, but nowhere near what is needed for a comfortable retirement in a middle-class lifestyle.

Advice: 
What you need to do:

Take a long hard look at your expenses. This is critical since we are now in challenging economic times. Mindfully track your spending habits for a month and cut back on luxuries that you can live without.

If it helps, set up a standing instruction with your bank to automatically transfer a portion of your salary into another bank account. Use that to start investing.
​
​Every small portion helps, so don’t think that cutting back on a small luxury is insignificant.