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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 This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. 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