From the category archives:

Malaysia

Malaysia MYR Rally: Still Has Legs Near Term

15 March 2010

Since early March, the MYR has strengthened 2.2% against the USD. Year-to-date, the MYR has been the best performing currency in Asia, especially vs the USD and also on a NEER basis. The SGD-MYR cross has now decisively breached the 2.40 barrier, and is now testing the 2.37 handle. Bank Negara does not seem overly concerned about recent currency strength. Gov. Zeti told Bloomberg that the currency’s appreciation reflects Malaysia’s strengthening fundamentals. Indeed, we suspect the central bank may be even welcoming expectations of a modestly strengthening currency. However, MYR rally may still have legs in the near term.

Malaysia: Upside Surprise in Jan IP Positive for MYR

11 March 2010

In tandem with export out-performance, Industrial Production growth accelerated to 12.7%YoY vs. its 7.5%YoY(revised from 8.9%YoY) in December, outperforming consensus and our expectations of 11.7% and 11.5% respectively. The strong Jan IP data comes on the back of an out-performance in Jan exports, which not only reinforces the cyclical catch up theme but reflects Bank Negara’s confidence on the growth outlook as indicated during the March 4th MPC meeting whereby OPR was raised 25bps. Going forward, we reiterate our expectation of a further 25bps hike in the OPR at the May MPC meeting, taking the OPR to 2.5%, with further hikes dependant on the incoming data.

Malaysia: Leading the Way in Policy Normalization

8 March 2010

Robust 4Q09 GDP growth surprised on the upside at 4.5% YoY (Consensus: 3.4%) and with the exception of private investments, was broad-based across most other demand segments. With the strong 4Q GDP performance, Malaysia’s GDP has now caught up vs. regional peers after lagging in 2Q and 3Q, and this could translate into near-term MYR outperformance. Nonetheless, the weakness in private investments continues to be a soft spot in the economy. Overall, we see upside risks to our above-consensus GDP forecast of 5.5% for 2010. This forecast assumes YoY GDP growth will peak at >8% in 1Q10, before moderating thereafter.

Malaysia: Upside Surprise in Exports and Trade Surplus Positive for MYR

6 March 2010

Exports leapt by 37.0% YoY in Jan 10 (Dec: 18.7%) outperforming market expectations (31.3%), but somewhat in-line with our expectations (38.6%). The outperformance was mostly due to favourable base effects. The stronger growth in exports caused the Jan trade surplus to widen to RM12.93bn from Dec’s RM12.1bn, significantly outperforming market expectations of Rm10.2bn.

Malaysia: Taking the Lead in Policy “Normalization”

4 March 2010

As earlier signaled, the decision for a small hike in the OPR was in line with our (non-consensus) expectation, but market views were more divided. Although the KLIBOR futures already priced in 75bps of hikes by end-2010, 16 out of 29 economists surveyed on Bloomberg expected no change.

Malaysia January Car Sales Review: Up 6% MoM

3 March 2010

New car sales rose 6% MoM in January as consumer sentiment improved with economic recovery. However, we expect sales in February to soften MoM due to shorter working days in conjunction with Chinese New Year festive holiday. The strong YoY growth in January 2010 was mainly due to the low base in January 2009, with stronger national (+36% YoY) and non-national cars sales (+28% YoY).

Malaysia Banks: Hike in OPR a Short Term Positive for Most Banks

2 March 2010

Following Bank Negara’s January MPC statement and Governor Zeti’s comments on normalization of policy rate, the central bank is widely expected to raise the Overnight Policy Rate (OPR) by 25bps to 2.25% in its MPC meeting on 4 March. CIRA economist expects a further 25bps increase in May, lifting OPR to 2.5%. CIRA economist also believes the OPR hike could be accompanied by a 50bps rise in the Statutory Reserve Requirement (SRR) which is currently at a low 1%.

Malaysia Banks: Off To Promising Start In 2010

2 March 2010

Loan growth stays on upward trajectory: System loans +0.9% MoM and +8.6% YoY to RM790.6bn (Dec 09: +1.2% MoM, 7.8% YoY). Lending for mortgages +1.2% MoM, non-residential properties +1.6% MoM, working capital +0.6% MoM and auto vehicles +0.8% MoM. Only declines were personal use -0.9% MoM and consumer durables -13.1% MoM. Trends in lending indicators were firm in Jan 10 with loan applications +14.4% YoY to RM46.0bn, loan approvals +6.7% YoY to RM23.4bn and loan disbursements +7.4% YoY to RM56.5bn. Banking deposits, which rose significantly in Nov-Dec 09 lifted mainly by Maxis’ re-listing, dipped 0.4% MoM to RM1,058bn in Jan 10. Following the sharp 14% decline in Nov-Dec 09, banking system NPLs rose 0.7% MoM to RM28.9bn but gross NPL ratio was stable at 3.2%. With Malaysian economy out of recession and projected to grow 5.5% in 2010 (CIRA estimate), we expect system loans to expand by 8-10% this year.

Malaysia: Signposts for Early Policy Normalization

1 March 2010

Market shifting towards view of early policy rates normalization: (i) 4Q GDP points to subsiding growth concerns, catch-up with region; (ii) Gov Zeti consistently vocal about the need for rate normalization; and (iii) Robust Household credit growth a concern for BNM. n OPR hike could also be accompanied by a 50bp hike in the SRR, followed by another 25bp OPR hike in May, with further hikes dependent on incoming data (we expect a pause in July presently). The hikes would be calibrated to send a signal to those who assume that rates would stay low indefinitely, yet not enough to cause significant real impact.

Malaysia: Robust 4Q GDP Strengthens Case for Early Rate Normalization

24 February 2010

4Q09 GDP turns positive, outperforms market expectations but in line with ours ; Demand recovery broad-based, except for private investments; CPI inflation remained tame in January; Subsiding growth concerns leads us closer to early policy rate normalization;

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