Impact of interest rate hike

On 10 Nov 2017, Bank Negara gave its strongest signal that the benchmark overnight policy rate (OPR) may be raised. The central bank said policymakers may consider reviewing the current degree of monetary accommodation, given the strength of the global and domestic macroeconomic conditions.

Domestic conditions:

  • Malaysia Q3 2017 GDP has recorded a 6.2% growth
  • Malaysia inflation rate has been surging high due to fuel cost

Macroeconomic condition

  • The US Federal Reserve has raised the federal funds rate twice in 2017 and another hike is expected in December
  • Bank of England raised the benchmark interest rate in early Nov 2017 for the first time since 2007.
  • The European Central Bank has unveiled plans to cut back on its quantitative easing

A 25-basis (0.25%) OPR hike is expected in January 2018, with a further hike in 2018 possible.

With the era of cheap money and low interest rate gone, how can investors profit from the age of rising interest rate?

Sectors that will be benefited:

Banks

Banks are likely to benefit from rising interest rates because their net interest margins are likely to expand as interest rates go higher. Banks make money by borrowing at low short term interest rate (Savings) and lend it out at a higher longer term rates (housing loan). A rate hike could give banks an opportunity to earn more from the spread.

However, banks may also face an increase in non-performing loan due to the borrower worsening repayment capability. Furthermore, when short term interest rate rise faster than long term interest rate, yield curve is flattened. A flattening yield curve will erode bank’s profit.

Insurance companies

Insurance companies generally don’t make much profit from premiums. They invest premiums to generate profits. Since most insurance companies’ investments are bonds, rising rates can significantly boost profits

Importers

When interest rates rise, it pushes the value of currency up. A strengthening Ringgit helps importers to buy foreign goods cheaply.

 

Here are some sectors investors should be aware of under the environment of rising rate:

 REITs
REITs perform poorly as rates rise. These companies rely heavily on borrowed money and could see profit margins contract if rates increase. As for REITs with relatively low debt levels, they could face selling pressure as they may seem less attractive when bond yields rise.

Utilities and telecoms

Utilities and telco companies tend to carry a lot of debt. Moreover these companies don’t produce much growth and pay out most of their earnings as dividends. In other words, these relatively high dividends are more like bonds as they provide a steady source of income to investors. If bond yields rise to a comparable level, utilities seem to be less attractive.

Property

When interest rate increases, interest payments on variable mortgages will increase. A higher mortgage rate will reduce housing affordability resulting to a slump in property sales.

Automotive

Due to an increase in interest payments, consumers are suffering a reduction in disposable income. This may hamper the consumer sentiment and push back their willingness in purchasing durable goods.

Exporters

When interest rates rise, it pushes the value of currency up. This will make exporter harder to sell Malaysia made products due to a higher price leading to a reduced competitiveness.

 

As interest rates begin to rise globally, now is a good time to re-evaluate your portfolio risk and to seek out emerging opportunities. In a rising interest rate environment, buying dividend-rich stocks purely for yield is becoming much riskier than it has been for the past few years.

 

 

2017年11月10日,马来西亚国家银行(BNM)发出最强烈的信号,即隔夜政策利率(OPR)可能上调。央行表示,鉴于全球和国内宏观经济的形势,国家银行可能会考虑检讨当前的货币供给政策。那究竟是什么条件让国家银行有底气说要升利息呢?

【国内条件】

  • 马来西亚2017年第三季度GDP录得6.2%的增长
  • 马来西亚的通胀率由于燃料成本而一直高涨

【宏观经济状况】

  • 美联储在2017年两次上调联邦基金利率,预计12月再次上调
  • 英国央行自2007年首次上调基准利率。
  • 欧洲央行已经公布了削减量化宽松的计划

因此市场预计国家银行将在2018年1月将进行25个基点(0.25%)的OPR上调,2018年可能进一步上调。

 

随着廉价和低利率时代的到来,投资者如何能从利率上升的时代中获利呢?一下是一些利率上涨的大环境下仍然有看头的行业

【银行】

银行业可能从利率上升中受益,因为利差会随着利率的上涨而扩大。银行是通过借【短天期,低利率】的储蓄,并进行【长天期,高利率】的放贷来赚钱。加息能使银行有机会从息差中获得更多收益。

然而,由于借款人偿还的能力恶化,银行也可能面临不良贷款暴增。 而且,当短期利率上涨的速度快于长期利率时将导致收益率曲线趋于平缓。 扁平化收益率曲线将严重因宪法银行的利润。

【保险公司】

保险公司一般不会从保费中获得很多利润。他们利用我们所缴交的保费进行投资,进而成为保险公司的利润。由于大多数保险公司都投资债券,上涨的利率可以显着提高保险公司的利润。

【进口商】

当利率上升时,货币通常会跟着升值。强劲的马币有助于进口商以较低的价格购买外国产品。

 

然而,利率上涨还是会对以下这些行业造成不小的冲击

【房地产投资信托基金/REITS】

房地产投资信托基金通常有较高的债务水平。当利率上升时,融资成本的上涨会影响这些公司的利润率。

至于债务水平相对较低的房地产投资信托基金也可能面临抛售压力。当债券收益率上升时,房地产投资信托基金作为一种风险比债卷大的产品,市场会要求更高的收益率作为风险的溢价。

【公用事业和电讯】

公用事业和电讯公司通常有大量的债务。此外,这些公司多半不会成长,并将大部分收入作为股息进行支付。喜欢存股的投资者都喜欢这写高股息的股票。然而,他们作为低利率环境下债券的替代品,当债券收益率上升到一定的水平,这些公司的股票将会面临到极大的抛售压力。

【房地产】

当利率上升时,每个月所要还利息也会相应增加。较高的贷款利率会降低人民对住房的负担能力,导致房地产销售数额下滑。

【汽车】

由于利息支付增加,消费者的可支配收入减少,这可能会妨碍消费者的情绪,并推迟他们购买耐用品的意愿。

【出口商】

当利率上升时,货币会相对的强势。由于价格上的竞争力下滑,这将使得出口商更难销售马来西亚制造的产品。

随着全球利率开始上涨,现在是重新评估您的投资组合风险,并寻找新机会的好时机。

简单来说,在利率上升的环境下,纯粹为收益率而购买高股息的股票已经是一项高风险的投资行为了。