Download Malaysia Low inflation, but at high price…

PP16832/01/2013 (031128)
Malaysia
Economics
Inflation & Subsidy
Suhaimi Ilias
[email protected]
(603) 2297 8682
Ramesh Lankanathan
[email protected]
(603) 2297 8685
William Poh
[email protected]
(603) 2297 8683
16 August 2012
Low inflation, but at high
price…
Malaysia’s inflation remained at sub-2% rate since Apr 2012 up to
the latest figure for July 2012, where the Consumer Price Index (CPI)
rose by +1.4% YoY (June 2012: +1.6% YoY, Maybank-IB: +1.7% YoY;
Consensus +1.6% YoY). MoM, inflation was unchanged (June 2012:
+0.1%). The inflation rate averaged +1.9% in Jan-July 2012 versus
+3.1% over the same period last year. Maintain our full-year inflation
rate forecasts of 2% for 2012 and 3.1% for 2013.
Current “disinflation” trend reflects the continuation of price
subsidies as the Subsidy Rationalisation Programmes (SRP) has been
frozen since mid-2011 to keep the retail prices of fuel (petrol, diesel,
LPG), essential food items (sugar, cooking oil, flour) and energy (gas,
electricity) stable.
Price subsidies are supposed to be reviewed every six months.
The SRP outlined periodic reviews of price subsidies between 2H 2010
until 2014, where the subsidised prices of fuel, food and energy are
supposed to be adjusted every six months by specified or fixed
amounts or percentages.
Inflation rate would have been at least one percentage point higher
on the direct impact of SRP if it is not suspended. We estimated
that the direct impact of across-the-board half-yearly reviews in the
subsidies for fuel, food and energy as outlined in SRP would have
resulted in inflation rates of 1.8% in 2010, 3.7% in 2011 and 3.0% in
Jan-July 2012 instead of the reported 1.7%, 3.2% and 1.9%
respectively. This however does not include the secondary effect on
prices of other goods and services, which is likely to be sizeable as well
in the wake of the en-bloc half-yearly subsidy reviews.
Delaying subsidy reforms has its costs. The partial subsidy reviews
between 2H 2010 and 1H 2011 yielded the Government MYR4.5b in
savings versus SRP’s ambitious target of MYR89.4b for 2010-2014. As
a result of the SRP suspension since mid-2011, Government spending
on subsidies this year will exceed the original budgeted amount for the
third consecutive year, and one-fifth of Government’s revenues and
operating expenditures are committed to subsidies. There are also
“opportunity costs” as the amount of the country’s annual subsidy bills
are getting as big as the sizes of the Government’s development
spending and the budget deficit. At the same time, gas subsidies
funded by PETRONAS remains around MYR19b per annum since
2008, and this takes away funds that can instead be used for
investment by the national oil company, especially in dealing with the
domestic gas supply issue which came to head last year when the gas
supply shortage hit the power sector.
SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Malaysia CPI, July 2012: Inflation & Subsidy
Continued sub-2% inflation rate in July 2012…
Malaysia’s inflation remained at sub-2% rate since Apr 2012 up to
the latest figure for July 2012, where the Consumer Price Index (CPI)
rose by +1.4% YoY (June 2012: +1.6% YoY, Maybank-IB: +1.7% YoY;
Consensus +1.6% YoY). Our in-house measure of core inflation, which
excludes food, fuel and housing components, also eased to +1.1% YoY
(June 2012: +1.2% YoY). MoM, inflation remained unchanged (June
2012: +0.1%). The inflation rate averaged +1.9% in Jan-July 2012
versus +3.1% over the same period last year.
Malaysia: Consumer Price Index (CPI, 2010=100)
% YoY
Apr 12
May 12
Jun 12
Jul 12
YTD 12
2011
Total
1.9
1.7
1.6
1.4
1.9
3.2
Food and NonAlcoholic Beverages
2.3
3.0
2.9
2.6
3.0
4.8
Alcoholic Beverages
& Tobacco
0.0
0.1
0.0
0.1
0.0
4.7
(0.3)
(0.3)
(0.6)
(0.5)
(0.4)
(0.2)
Housing, Water,
Electricity, Gas and
Other Fuels
1.8
1.6
1.5
1.5
1.7
1.8
Furniture,
Household
Equipment and
Routine Household
Maintenance
2.4
2.3
2.2
1.7
2.1
1.8
Health
2.2
2.1
2.0
1.9
2.2
2.7
Transport
1.0
0.4
0.2
(0.2)
0.9
4.4
(0.7)
(0.6)
(0.6)
(0.6)
(0.7)
(0.3)
Recreation Services
and Culture
1.3
1.3
1.3
1.0
2.0
2.0
Education
2.6
2.6
2.4
2.3
2.6
2.2
3.3
3.0
2.9
2.6
3.4
5.9
2.6
2.2
2.2
2.1
2.6
2.4
Clothing and
Footwear
Communication
Restaurants &
Hotels
Miscellaneous
Goods & Services
Source: Dept. of Statistics
Transport cost moved into a deflationary trend... “Transport”
component which accounts for 14.9% of overall CPI basket fell for the
first time in 31 months by -0.2% YoY on the back of the high base effect
from last year’s petrol pump price increases. Food price also eased
somewhat with “Food & Non-Alcoholic Beverages” (FNAB) component
moderating to +2.6% YoY compared to +2.9% YoY registered a month
prior. Cost within the “food basket” was helped down by falling prices of
“Meat” which dropped by -3.4% YoY (Jun 2012: -0.7% YoY) while
prices of “Milk, Cheese and Eggs” (Jul 2012: +1.7% YoY; Jun 2012:
+2.9% YoY) and “Sugar,Jam,Honey, Choc & Confectionery” (Jul 2012:
+0.4% YoY; Jun 2012: +0.5% YoY) moderated after the sharp gains
registered in the second half of last year. Prices of “Fish & Seafood”
(Jul 2012: +8.0% YoY; Jun 2012: +8.1% YoY) on the other hand
remained stubbornly high while there was a gradual pick up in the price
of “Fruits” (Jul 2012: +3.0; Jun 2012: +2.4% YoY)
16 August 2012
Page 2 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
Malaysia: Headline & Core CPI, PPI (% YoY)
Malaysia: Key CPI Components (% YoY)
20
12
14
15
9
12
6
10
25
20
15
PPI (LHS)
10
CPI (RHS)
5
3
8
0
6
(3)
4
(10)
(6)
2
(15)
(9)
0
Core CPI
(ex-Food & Non-Alcoholic
Beverages, Transport ), RHS
0
(5)
10
Transport (RHS)
5
0
(5)
Food & Non-Alcoholic
Beverages
(10)
Source: Dept of Statistics, Maybank KE
Source: Dept of Statistics, Maybank KE
CPI: Monthly contribution to growth (ppts)
FNAB: Growth in Components (% YoY)
0.4 0.2 0.0 Source: Dept. of Statistics, Maybank KE
Others
Housing, Water, Electricity, G
as & Other Fuels
Restautants & Hotels
Transport (incl. fuel)
Alcoholic Beverages &
Tobacco
Food and Non-Alcholic
Beverages
(0.2)
Jul-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
3.0 1.7 0.8 0.5 0.2 0.4 (3.4)
May‐2012
Jun‐2012
Jul‐2012
Sugar,Jam,Honey, Choc & Confectionery (SJ)
0.6 8.0 Vegetables
0.8 10.0 8.0 6.0 4.0 2.0 0.0 (2.0)
(4.0)
(6.0)
Fruits
Jul-12
Oils & Fats
Jun-12
Milk, Cheese and Eggs (MC)
May-12
Fish & Seafood
Apr-12
Meat
Mar-12
Rice, Bread and Other Cereals (RB)
1.0 Jan-11
Jul-10
Oct-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
Jan-09
Jul-08
Oct-08
Apr-08
Jan-08
Jul-07
Oct-07
Apr-07
(20)
Utilities, Housing & Other Fuels
(25)
Jan-07
Jan-12
May-12
Sep-11
Jan-11
May-11
Sep-10
Jan-10
May-10
Sep-09
Jan-09
May-09
Sep-08
Jan-08
May-08
Sep-07
Jan-07
May-07
(15)
Source: Dept. of Statistics, Maybank KE
… as price subsidies remains
Current “disinflation” trend largely reflects the continuation of
price subsidies. The key factor contributing to the currently low
domestic inflation rate is the suspension of the Subsidy Rationalisation
Programmes (SRP) since mid-2011 to keep the domestic retail prices of
fuel (petrol, diesel, LPG), essential food items (sugar, cooking oil, flour)
and energy (gas, electricity) stable and low.
The plan was to review price subsidies every six months. The SRP
was launched amid much fanfare – and controversy – back in May
2010 by PEMANDU that is tasked with charting, executing and
monitoring Malaysia’s economic transformation where subsidy reform is
one of the key agenda. It outlined the half-yearly reviews of price
subsidies between 2H 2010 until 2014, where the subsidised prices of
fuel, food and energy are supposed to be adjusted every six months by
a specified fixed amount or percentage, summarized by the table
overleaf.
16 August 2012
Page 3 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
Malaysia’s Subsidy Rationalisation Programme (SRP), 2010-2014
Proposed for 2H 2010
Proposed for 2011-2014
Fuel
Petrol (RON95, MYR/litre)
+MYR0.15
+MYR0.10 every 6 months
Diesel (MYR/litre)
+MYR0.10
+MYR0.10 every 6 months
+10%
+20% p.a.
Sugar (MYR/kg)
+MYR0.20
+MYR0.20 every 6 months until 2012
Flour (MYR/kg)
+MYR0.20
+MYR0.25 in 2011
+15%
+15% in 2011, +5% p.a. until Jan 2014
Power Sector (MYR/mmbtu)
+MYR4.65
+MYR3 every 6 months
Industry (MYR/mmbtu)
+MYR2.52
+MYR3 every 6 months
+MYR0.024
+MYR0.016 every 6 months
2,838
86,550 (21,637.5 p.a.)
LPG (MYR/kg)
Food
Cooking Oil (1kg)
Gas
Electricity (MYR/kWh)
TARGETED SAVINGS (MYRm)
Source: PEMANDU
What actually happened? While the SRP kicked off in mid-2010 as
scheduled, it was a watered down version i.e. not the en-bloc or acrossthe-board reviews of the identified price subsidies, but more selective
and rotational. The first round of review on 16 July 2010 involved
subsidised sugar and fuel (petrol, diesel, LPG) prices only. This was
followed by the second round announced, which also involved
subsidised sugar and fuel prices. The third – and the last – review was
in May-June 2011 involving sugar and gas prices as well as electricity
tariffs. The actual changes to-date are summarized in the table below
and the series of charts overleaf showed the proposed path against
actual path of these subsidised fuel, food and energy prices.
Malaysia’s Actual Subsidy Rationalisation, 2010-2011
Actual 16/7/2010
Actual 4/12/2010
Actual 10/5/2011
Actual 1/6/2011
Total
Fuel
Petrol (RON95, MYR/litre)
+MYR0.05
+MYR0.05
NIL
NIL
+MYR0.10
Diesel (MYR/litre)
+MYR0.05
+MYR0.05
NIL
NIL
+MYR0.10
+MYR0.10 (+2.7%)
+MYR0.05 (+5.7%)
NIL
NIL
+MYR0.15 (+8.6%)
Sugar (MYR/kg)
+MYR0.25
+MYR0.20
+RM0.20
NIL
+MYR0.65
Flour (MYR/kg)
NIL
NIL
NIL
NIL
NIL
Cooking Oil (1kg)
NIL
NIL
NIL
NIL
NIL
Power Sector (MYR/mmbtu)
NIL
NIL
NIL
+MYR3.00
+MYR3.00
Industry (MYR/mmbtu)
NIL
NIL
NIL
+MYR2.65
+MYR2.65
Electricity (MYR/kWh)
NIL
NIL
NIL
Average increase of
7.12% (to MYR0.3354
from MYR0.3131)
+MYR0.0223
ACTUAL SAVINGS (MYRm)
780
1,180
116.6
2,391.6
4,468.2
LPG (MYR/kg)
Food
Gas
Sources: PEMANDU, Media Reports, Maybank KE
16 August 2012
Page 4 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
Malaysia’s RON95 Petrol Price: Proposed Under SRP vs
Actual To-Date
Malaysia’s Diesel Price: Proposed Under SRP vs Actual
To-Date
2.90
2.70
2.70
2.50
2.50
2.30
2.30
2.10
2.10
Proposed RON95 Petrol Price (MYR/litre)
Proposed Diesel Price (MYR/litre)
end-2014
mid-2014
end-2013
mid-2013
end-2012
mid-2012
end-2011
mid-2011
mid-2010
end-2014
mid-2014
end-2013
mid-2013
end-2012
mid-2012
mid-2010
end-2011
1.50
mid-2011
1.70
1.50
end-2010
1.70
end-2010
1.90
1.90
Actual Diesel Price (MYR/litre) to date
Actual RON95 Petrol Price (MYR/litre) to date
Sources: PEMANDU, Maybank KE
Sources: PEMANDU, Maybank KE
Malaysia’s LPG Price: Proposed Under SRP vs Actual ToDate
Malaysia’s Sugar Price: Proposed Under SRP vs Actual
To-Date
4.50
2.90
4.00
2.70
2.50
3.50
2.30
3.00
2.10
2.50
Proposed LPG Price (MYR/kg)
Proposed Sugar Price (MYR/kg)
Actual LPG Price (MYR/litre) to date
end-2012
mid-2012
end-2011
mid-2011
mid-2010
end-2014
mid-2014
end-2013
mid-2013
end-2012
mid-2012
end-2011
mid-2010
mid-2011
1.50
end-2010
1.70
1.50
end-2010
1.90
2.00
Actual Sugar Price (MYR/kg) to date
Sources: PEMANDU, Maybank KE
Sources: PEMANDU, Maybank KE
Malaysia’s General Purpose (GP) Flour Price: Proposed
Under SRP vs Actual To-Date
Malaysia’s Cooking Oil Price: Proposed Under SRP vs
Actual To-Date
1.90
Proposed Cooking Oil Price (MYR/kg)
Actual GP Flour Price (MYR/kg) to date
Actual Cooking Oil Price (MYR/kg) to date
end-2014
mid-2014
end-2013
mid-2013
end-2012
mid-2012
Proposed GP Flour Price (MYR/kg)
Sources: PEMANDU, Maybank KE
16 August 2012
end-2011
mid-2011
end-2010
mid-2010
1.20
end-2012
1.30
mid-2012
1.40
end-2011
1.50
mid-2011
1.60
end-2010
1.70
mid-2010
4.00
3.80
3.60
3.40
3.20
3.00
2.80
2.60
2.40
2.20
2.00
1.80
Sources: PEMANDU, Maybank KE
Page 5 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
Malaysia’s Power Sector Gas Price: Proposed Under SRP
vs Actual To-Date
Malaysia’s Average Electricity Tariff: Proposed Under
SRP vs Actual To-Date
45
Proposed Power Sector Gas Price (MYR/mmbtu)
Proposed Avg Electricity Tariff (sen/kWh)
Actual Power Sector Gas Price (MYR/mmbtu) to date
Actual Avg Electricity Tariff (sen/kWh) to date
Sources: PEMANDU, Maybank KE
end-2014
end-2010
mid-2010
end-2014
mid-2014
end-2013
mid-2013
end-2012
mid-2012
end-2011
mid-2011
end-2010
mid-2010
5
mid-2014
10
end-2013
15
mid-2013
20
end-2012
25
mid-2012
30
end-2011
35
mid-2011
48
46
44
42
40
38
36
34
32
30
40
Sources: PEMANDU, Maybank KE
How would Malaysia’s inflation rate looks like if SRP were
implemented as scheduled? If things went according to SRP, we
estimated that the direct impact of an across-the-board reviews in the
subsidies for fuel, food and energy would have resulted in inflation rates
of 1.8% in 2010, 3.7% in 2011 and 3.0% in Jan-July 2012 instead of the
actual 1.7%, 3.2% and 1.9% respectively that reflected partial reviews
in 2010-2011 and no review in 1H 2012. This does not yet include the
secondary effect on prices of other goods and services that is likely to
be sizeable as well in the wake of the en-bloc half-yearly reviews in
those subsidies. We estimated that the secondary effect can add at
least another one percentage point to the above simulated inflation
rates.
Malaysia: Actual CPI vs Simulated CPI (Direct Impact of Full Subsidy
Rationalisation), Jan 2010 – June 2012
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Actual CPI (% YoY)
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
0.0
Simulated CPI (% YoY)
Source: Department of Statistics, PEMANDU, Maybank KE Calculation
16 August 2012
Page 6 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
High and rising cost of “subsidised” inflation
Delays in subsidy reforms have its costs. The three rounds of
limited subsidy reviews noted above only yielded the Government
MYR4.5b in savings, while the SRP target was an ambitious MYR89.4b
savings for the period 2010-2014.

Subsidies to exceed the original budgeted amount for the third
consecutive year in 2012, whereas the trend before 2010 was
volatile (i.e. changing between below-budget and above-budget).
This reflects the impact of SRP suspension since mid-2011 which
caused the Government to incur extra subsidy spending versus
what was originally budgeted for. To note, for 2012, there is a
supplementary allocation of MYR7.864b for fuel and food subsidies,
adding to the MYR33.197b already earmarked under the original
Budget 2012.

One-fifth of Government’s revenues and operating
expenditures are channeled to subsidies. As of 2011, subsidies
accounted for 19.9% of the Government’s operating spending, and
since operating spending is fully-funded by revenues, 19.6% of the
Government incomes were committed to foot the subsidy bills as a
result. We estimated that these ratios to rise to 20.9% and 20.3%
respectively in 2012, close to the record highs in 2008.

High “opportunity costs” of subsidies. Last year, subsidies
were equivalent to 78% of the Government’s gross development
expenditure (GDE). This year, we expect the ratio to increase to
83%. Similarly, if we are to express the subsidies as % of budget
deficit, last year’s ratio was 85% and we expect this to reach 95%.
Both ratios showed the country’s annual subsidy bills are getting as
big as GDE and budget deficit! Meanwhile, gas subsidies funded
by PETRONAS remains around MYR19b per annum since 2008.
This takes away funds that can instead be used for investment by
the national oil company, especially in dealing with the domestic
gas supply issue which came to head last year when the gas supply
shortage hit the power sector.
Malaysia: Subsidies under Government Operating Expenditures (MYRm)
Components
Fuel i.e. Petrol, Diesel, Liquefied Petroleum Gas (LPG)
1
Assistance for education
Interest rate differential subsidy and electricity
Paddy, rice, sugar and flour
Cooking Oil Price Stabillisation Scheme
2
Incentives
3
Other welfare assistance
4
Others
TOTAL
As % of Revenue
As % of Operating Expenditure
As % of Gross Development Expenditure
As % of Budget Deficit
As % of GDP
vs Original Budget Allocation
Difference (Actual Minus Budgeted)
2005
10,984
983
627
626
0
0
14
153
13,387
12.6
13.7
43.8
71.5
2.5
5,341
8,046
2006
7,558
1,018
522
841
0
0
12
161
10,112
8.2
9.4
28.2
52.9
1.7
11,022
(910)
2007
7,473
1,176
741
709
0
155
15
212
10,481
7.5
8.5
25.8
50.7
1.6
11,908
(1,427)
2008
17,556
8,974
815
1,266
438
1,943
37
4,137
35,166
22.0
22.9
82.1
98.8
4.6
10,233
24,933
2009
6,190
6,698
1,085
2,138
0
1,091
1,605
1,538
20,345
12.8
13.0
41.1
42.9
2.9
33,799
(13,454)
2010
9,605
5,987
1,367
1,927
828
524
2,376
493
23,107
14.5
15.2
43.8
53.4
2.9
20,920
2,187
2011
20,375
5,984
1,430
2,308
1,626
533
3,027
973
36,256
19.6
19.9
78.1
85.3
4.1
23,704
12,552
1
Scholarships and educational aids
Incentives to help farmers, fishermen and livestock entrepreneurs to increase food production
3
Includes assistance to the poor, senior citizens, Orang Asli (indigenous people), disabled and other vulnerable groups
4
Includes cash rebate and others
Sources: MoF, Department of Statistics
2
16 August 2012
Page 7 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
Malaysia: Gas Price Subsidies (Funded by PETRONAS, MYRb)
25
19.7
19.5
5.9
6.8
18.9
20
15.6
15
7.7
20.1
18.4
8.5
8.1
3.9
10
8.1
7.3
6.7
6.2
6.7
6.4
5
5.0
5.7
5.4
5.0
4.9
3.9
FY2007
FY2008
FY2009
FY2010
FY2011
PE 2011
0
Power Sector - TNB
Power Sector - IPPs
Non-Power Sector - Industries, Commercial
Source: PETRONAS
1.75
2.5
2.39
2.39
3.0
2.45
Global: Fossil Fuel Subsidies i.e. Oil, Fuels, Gas, Coal (% of GDP) –
Malaysia among the most highest in the world, excluding oil-rich
nations.
2.0
0.09
0.25
0.10
0.59
0.06
0.03
0.20
0.52
0.09
0.24
0.65
0.5
0.06
0.02
0.09
0.001
0.0002
1.0
0.50
0.44
0.12
0.12
0.27
0.26
1.5
Australia
Belgium
Canada
France
Germany
Hungary
Indonesia
Ireland
Israel
Italy
Japan
South Korea
Malaysia
Mexico
Netherlands
NZ
Norway
Philippines
Poland
Spain
Sweden
Thailand
Turkey
UK
US
Vietnam
0.0
Sources: Global Subsidies
Development), Maybank KE
Initiatives
(International
Institute
for
Sustainable
SRP will resume – when and how? We expect the SRP suspension
to continue until up to mid-2013 amid expectation of general election
later this year or by 2Q 2013 at the latest. The next key question is
whether the subsidy adjustments will be broad-based and catch up with
the original SRP’s schedule to meet the 2014 deadline, or will the
subsidy rollback continued to be done selectively and gradually,
resulting in potential push back of the deadline for the completion of the
subsidy reform by as much as two years. At this juncture, we are
inclined to think that the latter is likely to be the case.
Gas prices might be reviewed next and possibly soon. In the
interim, there is also the possibility of adjustment in gas prices in late3Q2012 or early-4Q2012 following the expected completion of the
Melaka’s regassification plant that will process imported gas for
domestic consumption, as this means there will be a need for some
recalibration in the current domestic gas prices structure to reflect the
global market price of the incoming supplies of imported gas.
16 August 2012
Page 8 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
Maintain our 2012 and 2013 inflation rate forecasts of 2% and 3.1%
respectively. Notwithstanding the observed disinflationary effect of the
SRP freeze, our full-year forecasts implies gradual upward pressures
on consumer prices to emerge in 2H 2012 on both seasonal factor (i.e.
higher demand for food items, hence prices, during 3Q 2012 with the
start of the Muslims’ fasting month in mid-July and the subsequent
festive month) as well as policy factor (i.e. adjustment in prices by
businesses to reflect the upcoming implementation of the Minimum
Wage). The SRP resumption priced in after mid-2013 will further
maintain the gradual upward momentum in inflation rate. In addition,
certain industries have recently submitted price hike proposals to the
Government e.g. 14% hike in doctors’ fees at private hospitals; 40%
hike in express and stage bus fares.
Global Commodity Prices (% YoY)
Type of Commodity
Mar-12
Apr-12
May-12
Jun-12
Jul-12
2011
2010
1.1
(5.9)
(7.1)
(13.3)
(10.6)
26.8
27.7
Non-Fuel index
(12.4)
(14.6)
(14.5)
(14.6)
(11.5)
18.9
26.7
Food and beverage index
(7.9)
(10.2)
(11.0)
(8.8)
(0.0)
20.5
11.8
All index
Food index
(5.9)
(8.5)
(9.3)
(7.0)
2.5
20.9
11.6
Beverages index
(23.0)
(23.4)
(24.7)
(23.2)
(19.9)
17.2
14.5
Industrial Materials index
(16.5)
(18.6)
(17.7)
(19.9)
(21.7)
17.6
45.5
Agricultural Raw Material Index
(18.8)
(18.4)
(14.6)
(17.4)
(16.1)
24.0
33.7
Metal index
(15.3)
(18.6)
(19.3)
(21.2)
(24.4)
14.9
52.0
9.1
(1.0)
(2.9)
(12.6)
(10.1)
32.0
28.8
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
All index
2.4
3.9
3.0
(2.0)
(6.3)
(8.3)
4.7
Non-Fuel index
2.6
2.9
1.0
(0.2)
(3.3)
(2.1)
4.1
Food and beverage index
1.2
2.9
1.9
0.3
(2.8)
(0.5)
8.9
Energy index
Source: IMF
Global Commodity Prices (% MoM)
Type of Commodity
Food index
1.3
3.4
2.5
0.7
(2.8)
(0.5)
9.3
Beverages index
0.4
(1.1)
(3.0)
(2.9)
(2.5)
(0.9)
4.9
Industrial Materials index
4.0
3.0
0.1
(0.7)
(3.8)
(3.7)
(0.9)
Agricultural Raw Material Index
1.8
3.9
0.6
1.4
(1.5)
(3.3)
(0.1)
Metal index
5.2
2.5
(0.1)
(1.7)
(5.0)
(4.0)
(1.4)
Energy index
2.3
4.4
4.0
(2.9)
(7.8)
(11.4)
5.0
Source: IMF
16 August 2012
Page 9 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
Global: Inflation (% YoY)
Global: Commodity Price Indices
7.0
250
230
6.0
210
5.0
190
4.0
170
150
3.0
130
2.0
110
90
1.0
Food & Beverages
Source: Bloomberg, CEIC, Maybank KE
Energy & Fuel
Jul-12
Apr-12
Jan-12
Jul-11
Oct-11
Apr-11
Jan-11
Jul-10
Oct-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
Jan-09
Jul-08
Oct-08
Apr-08
Jan-08
Jul-07
Oct-07
Oct-11
May-12
Mar-11
Jan-10
Aug-10
Jun-09
Apr-08
Nov-08
Sep-07
Jul-06
Feb-07
Dec-05
Oct-04
May-05
Mar-04
Jan-03
Aug-03
Jun-02
Apr-01
Nov-01
Feb-00
Sep-00
Apr-07
Jan-07
70
0.0
Industrial Input
Source: IMF
Global: Headline Consumer Price Index (YoY, %)
Dec-11
3.7
Jan-12
3.5
Feb-12
3.3
Mar-12
3.2
Apr-12
3.0
May-12
2.7
Jun-12
2.6
Jul-12
-
2012 YTD
3.0
2011
4.0
3.0
2.7
(0.2)
2.3
4.2
2.9
2.9
2.7
0.1
2.3
3.6
2.8
2.9
2.7
0.3
2.5
3.4
2.8
2.7
2.7
0.5
2.3
3.5
2.6
2.3
2.6
0.4
2.2
3.0
2.4
1.7
2.4
0.2
2.2
2.8
2.1
1.7
2.4
(0.2)
2.0
2.4
2.1
1.9
2.6
-
2.4
2.6
0.2
2.2
3.0
2.5
3.2
2.7
(0.3)
2.5
4.5
2.9
China
India
Russia
Brazil
4.1
6.5
6.1
6.5
4.5
5.3
4.2
6.2
3.2
7.6
3.7
5.9
3.6
8.6
3.7
5.2
3.4
10.2
3.6
5.1
3.0
10.3
3.6
5.0
2.2
10.0
4.3
4.9
1.8
11.0
5.6
5.2
3.1
9.0
4.1
5.4
5.4
8.9
8.5
6.6
S. Korea
Taiwan
Hong Kong
Singapore
4.2
2.0
5.7
5.5
3.4
2.4
6.1
4.8
3.1
0.2
4.7
4.6
2.6
1.3
4.9
5.2
2.5
1.4
4.7
5.4
2.5
1.7
4.3
5.0
2.2
1.8
3.7
5.3
1.5
2.5
-
2.5
1.6
4.7
5.1
4.0
1.4
5.3
5.2
Indonesia
Thailand
Malaysia
Philippines
Vietnam
3.8
3.5
3.0
4.2
18.1
3.7
3.4
2.7
4.0
17.3
3.6
3.4
2.2
2.7
16.4
4.0
3.5
2.1
2.6
14.2
4.5
2.5
1.9
3.0
10.5
4.5
2.5
1.7
2.9
8.3
4.5
2.6
1.6
2.8
6.9
4.6
2.7
1.4
3.2
-
4.2
2.9
1.9
3.0
10.5
5.4
3.8
3.2
4.7
18.6
Global
US
Eurozone
Japan
Germany
UK
OECD
Source: Bloomberg, CEIC, Maybank KE
Global: Core Consumer Price Index (YoY, %)
Dec-11
2.2
1.6
(1.1)
3.0
2.0
Jan-12
2.3
1.5
(0.8)
2.6
1.9
Feb-12
2.2
1.5
(0.5)
2.4
1.9
Mar-12
2.3
1.6
(0.4)
2.5
1.8
Apr-12
2.3
1.6
(0.3)
2.1
1.9
May-12
2.3
1.6
(0.6)
2.2
1.9
Jun-12
2.2
1.6
(0.6)
2.1
1.8
Jul-12
2.3
-
2012 YTD
2.3
1.6
(0.5)
2.3
1.9
2011
1.7
1.4
(1.0)
3.2
1.6
China
1.9
1.8
1.7
1.8
1.7
1.4
1.4
1.5
1.6
2.7
S. Korea
Taiwan
3.6
1.2
3.2
1.8
2.5
(0.0)
1.9
0.7
1.8
0.9
1.6
0.9
1.5
0.8
1.2
1.0
2.0
0.9
3.2
1.1
2.9
2.7
1.8
2.9
2.8
1.7
3.1
2.1
1.4
3.0
2.0
1.3
2.9
1.9
1.2
2.7
1.9
1.1
2.9
2.3
1.4
4.3
2.4
2.0
US
Eurozone
Japan
UK
OECD
Indonesia
2.8
3.0
Thailand
2.7
2.8
Malaysia
2.2
1.8
Source: Bloomberg, CEIC, Maybank KE
16 August 2012
Page 10 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
RESEARCH OFFICES
REGIONAL
P K BASU
Regional Head, Research & Economics
(65) 6432 1821 [email protected]
WONG Chew Hann, CA
Acting Regional Head of Institutional Research
(603) 2297 8686 [email protected]
THAM Mun Hon
Regional Strategist
(852) 2268 0630 [email protected]
ECONOMICS
Suhaimi ILIAS
Chief Economist
 Singapore | Malaysia
(603) 2297 8682 [email protected]
Luz LORENZO
Economist
 Philippines | Indonesia
(63) 2 849 8836 [email protected]
ONG Seng Yeow
Regional Products & Planning
(852) 2268 0644 [email protected]
MALAYSIA
WONG Chew Hann, CA Head of Research
(603) 2297 8686 [email protected]
 Strategy
 Construction & Infrastructure
Desmond CH’NG, ACA
(603) 2297 8680 [email protected]
 Banking - Regional
LIAW Thong Jung
(603) 2297 8688 [email protected]
 Oil & Gas
 Automotive
 Shipping
ONG Chee Ting
(603) 2297 8678 [email protected]
 Plantations
Mohshin AZIZ
(603) 2297 8692 [email protected]
 Aviation
 Petrochem
 Power
YIN Shao Yang, CPA
(603) 2297 8916 [email protected]
 Gaming – Regional
 Media
 Power
WONG Wei Sum, CFA
(603) 2297 8679 [email protected]
 Property & REITs
LEE Yen Ling
(603) 2297 8691 [email protected]
 Building Materials
 Manufacturing
 Technology
LEE Cheng Hooi Head of Retail
[email protected]
 Technicals
HONG KONG / CHINA
Edward FUNG Head of Research
(852) 2268 0632 [email protected]
 Construction
Ivan CHEUNG
(852) 2268 0634 [email protected]
 Property
 Industrial
Ivan LI
(852) 2268 0641 [email protected]
 Banking & Finance
Jacqueline KO
(852) 2268 0633 [email protected]
 Consumer Staples
Andy POON
(852) 2268 0645 [email protected]
 Telecom & equipment
Alex YEUNG
(852) 2268 0636 [email protected]
 Industrial
Anita HWANG, CFA
(852) 2268 0142 [email protected]
 Consumer Discretionaries
 Special Situations
INDIA
Jigar SHAH Head of Research
(91) 22 6623 2601 [email protected]
 Oil & Gas
 Automobile
 Cement
Anubhav GUPTA
(91) 22 6623 2605 [email protected]
 Metal & Mining
 Capital goods
 Property
Ganesh RAM
(91) 226623 2607 [email protected]
 Telecom
 Contractor
16 August 2012
SINGAPORE
Stephanie WONG Head of Research
(65) 6432 1451 [email protected]
 Strategy
 Small & Mid Caps
Gregory YAP
(65) 6432 1450 [email protected]
 Technology & Manufacturing
 Telcos - Regional
Wilson LIEW
(65) 6432 1454 [email protected]
 Hotel & Resort
 Property & Construction
James KOH
(65) 6432 1431 [email protected]
 Logistics
 Resources
 Consumer
 Small & Mid Caps
YEAK Chee Keong, CFA
(65) 6433 5730 [email protected]
 Healthcare
 Offshore & Marine
Alison FOK
(65) 6433 5745 [email protected]
 Services
 S-chips
Bernard CHIN
(65) 6433 5726 [email protected]
 Transport (Land, Shipping & Aviation)
ONG Kian Lin
(65) 6432 1470 [email protected]
 REITs / Property
Wei Bin
(65) 6432 1455 [email protected]
 S-chips
 Small & Mid Caps
INDONESIA
Katarina SETIAWAN Head of Research
(62) 21 2557 1125 [email protected]
 Consumer
 Strategy
 Telcos
Lucky ARIESANDI, CFA
(62) 21 2557 1127 [email protected]
 Base metals
 Coal
 Oil & Gas
Rahmi MARINA
(62) 21 2557 1128 [email protected]
 Banking
 Multifinance
Pandu ANUGRAH
(62) 21 2557 1137 [email protected]
 Auto
 Heavy equipment
 Plantation
 Toll road
Adi N. WICAKSONO
(62) 21 2557 1130 [email protected]
 Generalist
Anthony YUNUS
(62) 21 2557 1134 [email protected]
 Cement
 Infrastructure
 Property
Arwani PRANADJAYA
(62) 21 2557 1129 [email protected]
 Technicals
THAILAND
Mayuree CHOWVIKRAN Head of Research
(66) 2658 6300 ext 1440 [email protected]
 Strategy
Maria BRENDA SANCHEZ LAPIZ Co-Head of Research
Dir (66) 2257 0250 | (66) 2658 6300 ext 1399
[email protected]
 Consumer/ Big Caps
Andrew STOTZ Strategist
(66) 2658 6300 ext 5091
[email protected]
Suttatip PEERASUB
(66) 2658 6300 ext 1430 [email protected]
 Media
 Commerce
Sutthichai KUMWORACHAI
(66) 2658 6300 ext 1400 [email protected]
 Energy
 Petrochem
Termporn TANTIVIVAT
(66) 2658 6300 ext 1520 [email protected]
 Property
Woraphon WIROONSRI
(66) 2658 6300 ext 1560 [email protected]
 Banking & Finance
Jaroonpan WATTANAWONG
(66) 2658 6300 ext 1404 [email protected]
 Transportation
 Small cap.
Suchot THIRAWANNARAT
(66) 2658 6300 ext 1550 [email protected]
 Automotive
 Construction Materials
 Soft commodity
Pongrat RATANATAVANANANDA
(66) 2658 6300 ext 1398 [email protected]
 Services/ Small Caps
VIETNAM
Michael KOKALARI, CFA Head of Research
+84 838 38 66 47 [email protected]
 Strategy
Nguyen Thi Ngan Tuyen
+84 844 55 58 88 x 8081 [email protected]
 Food and Beverage
 Oil and Gas
Ngo Bich Van
+84 844 55 58 88 x 8084 [email protected]
 Banking
Nguyen Quang Duy
+84 844 55 58 88 x 8082 [email protected]
 Rubber
Dang Thi Kim Thoa
+84 844 55 58 88 x 8083 [email protected]
 Consumer
Nguyen Trung Hoa
+84 844 55 58 88 x 8088 [email protected]
 Steel
 Sugar
 Macro
PHILIPPINES
Luz LORENZO Head of Research
+63 2 849 8836 [email protected]
 Strategy
Laura DY-LIACCO
(63) 2 849 8840 [email protected]
 Utilities
 Conglomerates
 Telcos
Lovell SARREAL
(63) 2 849 8841 [email protected]
 Consumer
 Media
 Cement
Kenneth NERECINA
(63) 2 849 8839 [email protected]
 Conglomerates
 Property
 Ports/ Logistics
Katherine TAN
(63) 2 849 8843 [email protected]
 Banks
 Construction
Ramon ADVIENTO
(63) 2 849 8842 [email protected]
 Mining
Page 11 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
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offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that
each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings.
Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related
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16 August 2012
Page 12 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
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as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking
services, advisory and other services for or relating to those companies.
Singapore: As of 16 August 2012, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the
research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected
parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph
16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 16 August 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in
issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment
services in relation to the investment concerned or a related investment.
OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of
the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable
of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political
factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any
issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own
professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system:
BUY
Total return is expected to be above 15% in the next 12 months
HOLD
Total return is expected to be between -15% to +15% in the next 12 months
SELL
Total return is expected to be below -15% in the next 12 months
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only
applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings
as we do not actively follow developments in these companies.
Some common terms abbreviated in this report (where they appear):
Adex = Advertising Expenditure
BV = Book Value
CAGR = Compounded Annual Growth Rate
Capex = Capital Expenditure
CY = Calendar Year
DCF = Discounted Cashflow
DPS = Dividend Per Share
EBIT = Earnings Before Interest And Tax
EBITDA = EBIT, Depreciation And Amortisation
EPS = Earnings Per Share
EV = Enterprise Value
16 August 2012
FCF = Free Cashflow
FV = Fair Value
FY = Financial Year
FYE = Financial Year End
MoM = Month-On-Month
NAV = Net Asset Value
NTA = Net Tangible Asset
P = Price
P.A. = Per Annum
PAT = Profit After Tax
PBT = Profit Before Tax
PE = Price Earnings
PEG = PE Ratio To Growth
PER = PE Ratio
QoQ = Quarter-On-Quarter
ROA = Return On Asset
ROE = Return On Equity
ROSF = Return On Shareholders’ Funds
WACC = Weighted Average Cost Of Capital
YoY = Year-On-Year
YTD = Year-To-Date
Page 13 of 14
Malaysia CPI, July 2012: Inflation & Subsidy
Malaysia

Maybank Investment Bank Berhad
(A Participating Organisation of
Bursa Malaysia Securities Berhad)
33rd Floor, Menara Maybank,
100 Jalan Tun Perak,
50050 Kuala Lumpur
Tel: (603) 2059 1888;
Fax: (603) 2078 4194
Stockbroking Business:
Level 8, Tower C, Dataran Maybank,
No.1, Jalan Maarof
59000 Kuala Lumpur
Tel: (603) 2297 8888
Fax: (603) 2282 5136

Singapore
Maybank Kim Eng Securities Pte Ltd
Maybank Kim Eng Research Pte Ltd
9 Temasek Boulevard
#39-00 Suntec Tower 2
Singapore 038989

Hong Kong
Kim Eng Securities (HK) Ltd
Level 30,
Three Pacific Place,
1 Queen’s Road East,
Hong Kong

Philippines
Maybank ATR Kim Eng Securities
Inc.
17/F, Tower One & Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City, Philippines 1200

Tel: (63) 2 849 8888
Fax: (63) 2 848 5738
Thailand
Maybank Kim Eng Securities
(Thailand) Public Company
Limited
999/9 The Offices at Central World,
20th - 21st Floor,
Rama 1 Road Pathumwan,
Bangkok 10330, Thailand
Tel: (66) 2 658 6817 (sales)
Tel: (66) 2 658 6801 (research)

South Asia Sales Trading
Connie TAN
[email protected]
Tel: (65) 6333 5775
US Toll Free: 1 866 406 7447


Indonesia
PT Kim Eng Securities
Plaza Bapindo
Citibank Tower 17th Floor
Jl Jend. Sudirman Kav. 54-55
Jakarta 12190, Indonesia

Vietnam
In association with
New York
Maybank Kim Eng Securities
USA Inc
777 Third Avenue, 21st Floor
New York, NY 10017, U.S.A.
Tel: (212) 688 8886
Fax: (212) 688 3500

Tel: (62) 21 2557 1188
Fax: (62) 21 2557 1189
Tel: (852) 2268 0800
Fax: (852) 2877 0104

Maybank Kim Eng Securities
(London) Ltd
6/F, 20 St. Dunstan’s Hill
London EC3R 8HY, UK
Tel: (44) 20 7621 9298
Dealers’ Tel: (44) 20 7626 2828
Fax: (44) 20 7283 6674
Tel: (65) 6336 9090
Fax: (65) 6339 6003

London
India
Kim Eng Securities India Pvt Ltd
2nd Floor, The International 16,
Maharishi Karve Road,
Churchgate Station,
Mumbai City - 400 020, India
Tel: (91).22.6623.2600
Fax: (91).22.6623.2604

Saudi Arabia
In association with
Kim Eng Vietnam Securities
Company
1st Floor, 255 Tran Hung Dao St.
District 1
Ho Chi Minh City, Vietnam
Anfaal Capital
Villa 47, Tujjar Jeddah
Prince Mohammed bin Abdulaziz
Street P.O. Box 126575
Jeddah 21352
Tel : (84) 838 38 66 36
Fax : (84) 838 38 66 39
Tel: (966) 2 6068686
Fax: (966) 26068787
North Asia Sales Trading
Eddie LAU
[email protected]
Tel: (852) 2268 0800
US Toll Free: 1 866 598 2267
www.maybank-ke.com | www.kimengresearch.com.sg
16 August 2012
Page 14 of 14