Malaysian manufacturing returns to growth in June

Malaysia trade surplus above RM10b mark in May

According to IHS Markit PMI’s survey, Malaysia’s manufacturing sector returned to growth in June, rising sharply to 51.0, its highest since September 2018. This was up from 45.6 in May, indicating an improvement in the health of Malaysia’s goods producing sector and stronger economic growth more generally. Output grew at the joint fastest rate in the survey’s history as an increasing number of businesses restarted their operations post MCO. Its chief economist Chris Williamson said such a rapid turnaround in production since the severe collapse in April bodes well for a V-shaped recovery. However, a sustained recovery is by no means assured, and growth could easily lose momentum after the initial rebound. While business expectations continued to improve in June, confidence remains well below levels seen at the start of the year, in part reflecting worries about the impact of ongoing Covid-19 restrictions on demand, both at home and abroad. The survey noted there were encouraging signs that demand conditions were beginning to stabilise during June, with the New Orders Index rising to a six-month high. That said, overseas demand remained particularly fragile, weighing down total order book volumes.

Malaysia’s trade surplus above RM10b mark in May

According to International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali, Malaysia recorded a trade surplus above RM10 billion in May – the fourth time this year – registering a double-digit growth of 14.7 per cent year-on-year (y-o-y) to RM10.41 billion. Major exports in May are E&E products (RM23.5 billion), petroleum products (RM3.94 billion), chemicals and chemical products (RM3.68 billion), palm oil and palm oil-based agriculture products (RM3.6 billion) and rubber products (RM2.71 billion). The country’s total trade in May amounted to RM114.96 billion, down 27.8 per cent from May 2019. Exports totalled RM62.69 billion, contracted by 25.5 per cent while imports decreased by 30.4 per cent to RM52.27 billion. Malaysia’s trade during the first five months of 2020 declined 8.7 per cent to RM688.57 billion compared to the corresponding period of 2019. Exports of rubber products especially rubber gloves registered double-digit growth for two consecutive months, increasing 20.5 per cent or RM461 million in May 2020. The contraction of manufactured goods, which constituted 86.5 per cent of total exports, was due to lower exports of electrical and electronic (E&E) products, petroleum products, manufactures of metal, chemicals and chemical products as well as machinery, equipment and parts.

Malaysia’s current account to rebound in 2021

According to S&P Global Ratings, Malaysia’s current account surplus which has backed the economy against its long-running fiscal deficit, should recover to up to three per cent next year. But for 2020 the surplus is expected to shrink to between 1.0 per cent and 2.0 per cent of the country’s gross domestic product (GDP). This would be due to lower prices of oil and gas and palm oil. The country’s current account balance reportedly came in at 2.9 per cent of GDP for the year until the first quarter. The figure was broadly steady from the average current account surplus of 2.7 per cent of GDP in the preceding five years. Malaysia had for a long time been running on a fiscal deficit but its economy was supported by an external account surplus. However, the surplus has gradually come down over the years, and there was a bit of correction due to the tumble of commodity prices in 2014 and 2015. Over the past five years, Malaysia’s account surplus was averaging 2.0 per cent to 4.0 per cent of GDP. The rating agency expects oil prices to recover over the new few years, and this will most likely lead to a gradual recovery in Malaysia’s trade volume.

Malaysia’s AAA/stable foreign currency rating affirmed

Malaysian Rating Corp Bhd has affirmed its foreign currency sovereign rating of AAA/stable for Malaysia under its national rating scale. It said the AAA rating reflects the country’s several credit strengths, including a competitive and well-diversified economy. Malaysia was, for example, positioned relatively high at number 27 in the 2019 edition of the World Economic Forum’s Global Competitiveness Index 4.0 rankings. It pointed out that Malaysia’s competitiveness has been evident in among other things, a persistent current account surplus, and consequently, a healthy external position. Due in part to this, as well as proactive and practical economic and monetary management, spill-overs from episodic financial market volatility into the real economy have been minimal. The rating agency said the key credit challenges included the disruptive Covid-19 pandemic and the recent crude oil price collapse. Not surprisingly, it said the pandemic was the most worrisome factor with still no vaccine to fight the coronavirus.

Short Selling suspension extended until year end

The Securities Commission Malaysia (SC) and Bursa Malaysia have extended the temporary suspension of short-selling till Dec 31 2020. In a joint statement, the market regulators said the scope of the suspension remains unchanged in that it applies to Intraday Short Selling (IDSS) and Regulated Short Selling (RSS) as well as intraday short selling by Proprietary Day Traders. Permitted Short Selling (PSS) is not affected by the temporary suspension of short selling as PSS is necessary for market makers to market make the relevant securities such as exchange-traded funds efficiently. The temporary suspension which began on March 24 was extended to June 30 and now to year-end is part of a slew of proactive measures to mitigate potential risks arising from heightened volatility and global uncertainties as a result of the Covid-19 pandemic.

Electricity bill discount period extended till December

The Energy and Natural Resources Minister, Datuk Shamsul Anuar Nasarah, announced that domestic electricity users across Malaysia will continue to enjoy discounts of up to 50 percent on their bill till Dec 31, 2020. It is an extension to the previously announced April 1 – September 30 discount period unveiled by Prime Minister on March 27 as part of the Prihatin Economic Stimulus Package. The extension also applies to the 601-900kWh (per month) energy usage and 10 percent discount under the Bantuan Prihatin Elektrik (BPE) which was announced on June 20. The extension will benefit 7.66 million users in peninsular Malaysia, while the 2 percent discount for users in East Malaysia will benefit around 520,000 users in Sabah and 580,000 in Sarawak. He added that in peninsular Malaysia, the extra three months of discounts amounting to about RM392 million will be funded by Kumpulan Wang Industri Elektrik (KWIE), while the Ministry of Finance has allocated about RM6 million for the discounts to be enjoyed by domestic users in East Malaysia.

This week, on Thursday (2July), the Ringgit was 4.2860 against USD from 4.2850 on Monday (2July). Meanwhile, the Ringgit was 3.0755 to the Sing Dollar on Thursday (2July).

On Monday (29Jun), the FBM KLCI gained 6.29 points higher or 0.42% to 1494.43 from previous Friday’s close of 1488.14. But as at Friday (3July) 10:00am, the FBM KLCI, following regional markets, was higher at 1541.62 from Monday, buoyed by Wall Street’s strong gains and NASDAQ’s all time high due to the massive 4.8million jobs rise in the US for June. But as at Friday (3July) 10:00am, the FBM KLCI was rose to 1541.62 from Monday, following regional markets optimism on business reopening globally and the yesterday US reported better than expected employment data report.

FBM KLCI 3 Years Chart

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