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ECONOMIC AND FINANCIAL DEVELOPMENTS IN MALAYSIA IN THE SECOND QUARTER OF 2014

OVERVIEW

The Malaysian economy expanded by 6.4% in the second quarter of 2014

Global economic activity continued to expand at a moderate pace in the second quarter. The recovery in the US resumed after an unusual weather-related weakness in the first quarter. Growth in Japan was, however, affected by the implementation of the increase in the consumption tax in April. In Asia, economic activity continued to expand, albeit at a more moderate pace in most economies.

The Malaysian economy registered a strong growth of 6.4% in the second quarter of 2014 (1Q 2014: 6.2%), underpinned by higher exports and continued strength in private domestic demand. On the supply side, growth in the major economic sectors remained firm, supported by trade and domestic activity. On a quarter-on-quarter seasonally adjusted basis, the economy grew by 1.8% (1Q 2014: 0.8%).

Public consumption declined marginally by 1.3% (1Q 2014: 11.2%), reflecting lower Government spending on emoluments, and supplies and services. Public investment declined by of 3.3% (1Q 2014: -6.4%), due to lower spending on fixed assets by both the Federal Government and public enterprises.

On the supply side, growth in the major economic sectors remained strong. The services sector recorded sustained growth, supported mainly by the trade-related sub-sectors. The manufacturing sector expanded at a faster pace, underpinned by the electronics and electrical cluster, particularly semiconductors. The construction sector expanded at a more moderate pace, driven mainly by the residential and non-residential sub-sectors. Meanwhile, the agriculture sector registered strong growth, reflecting higher production of palm oil. The mining sector turned around to record positive growth, due mainly to higher production of both natural gas and crude oil.

The inflation rate, as measured by the annual change in the Consumer Price Index (CPI), averaged 3.3% in the second quarter of 2014 (1Q 2014: 3.4%). The slight decline was due to lower inflation in the food and non-alcoholic beverages and housing, water, electricity, gas and other fuels categories.

The trade surplus amounted to RM18.4 billion in the second quarter of 2014 (1Q 2014: RM26.3 billion). Gross exports grew at a stronger pace of 14.2% (1Q 2014: 10.8%), reflecting the continued expansion of global economic activity. Gross imports also increased, registering growth of 8.6% (1Q 2014: 5.5%).

The international reserves of Bank Negara Malaysia (BNM) amounted to RM423.6 billion (equivalent to USD131.9 billion) as at 30 June 2014. This reserve level has taken into account the quarterly adjustment for foreign exchange revaluation changes. As at 31 July 2014, the reserves position amounted to RM423.5 billion

Exports and private sector activity remained the key drivers of growth during the quarter. Private investment continued to register double-digit growth, expanding by 12.1% (1Q 2014: 14.1%), reflecting investments in the services and manufacturing sectors. Private consumption increased by 6.5% (1Q 2014: 7.1%), supported by stable employment conditions and continued wage growth. In contrast, public sector expenditure declined by 2.1% (1Q 2014: 2.7%).

RM billion

Source: Department of Statistics, Malaysia

The economy expanded in the second quarter(at constant 2005 prices)

Annual change (%)

1Q

2011 2Q 3Q 4Q 1Q

2012 2Q 3Q 4Q 1Q

2013 2Q 3Q 4Q 1Q

2014 2Q

6.2 6.4

0

1

2

3

4

5

6

7

0

50

100

150

200

250

35

Quarterly BulletinSecond Quarter 2014

(equivalent to USD131.8 billion), sufficient to finance 9.0 months of retained imports and is 1.2 times the redefined short-term external debt.

Interest rates remained stable

The 3-month interbank rate continued to rise throughout the quarter due to the preference of interbank lenders for shorter-term lending, in line with the shift in their deposits toward shorter maturities. This was further reinforced by expectations for an OPR increase between May and July, which resulted in further upward movement in the interbank rates. The average interbank rate for other maturities remained relatively stable. Retail deposit rates were stable during the period. The average quoted fixed deposit (FD) rates of commercial banks were relatively unchanged. Lending rates were also broadly stable throughout the period. The average base lending rate (BLR) of commercial banks remained unchanged at 6.53% while the weighted average lending rate (ALR) on outstanding loans was stable during the period (end-June 2014: 5.37%; end-March 2014: 5.39%).

The Overnight Policy Rate (OPR) was maintained at 3.00% during the second quarter of 2014. Amid firm growth prospects and with inflation expected to remain above its long-run average, the Monetary Policy Committee (MPC) decided to raise the OPR by 25 basis points to 3.25% on 10 July 2014. The adjustment in the degree of monetary accommodation was also aimed at mitigating the risk of broader economic and financial imbalances that could undermine longer-term growth prospects of the Malaysian economy. The wholesale and retail lending and deposit rates were revised to levels that are consistent with the current OPR level. The average BLR of commercial banks increased to 6.78%, with most commercial banks revising their respective BLRs by 25 basis points. Depositors were also compensated by a higher rate of

return on their savings following the increase in the OPR. The average quoted fixed deposit (FD) rates rose between 15 to 17 basis points to a higher range of 3.07% to 3.30% as at end-July. Notwithstanding the rise in the OPR, monetary conditions continue to remain supportive of economic activity.

The monetary aggregates continued to expand in the second quarter. M1, or narrow money, increased by RM2.2 billion during the quarter. On an annual basis, M1 expanded by 10.2% as at end-June (end-March 2014: 11.4%). M3, or broad money, increased by RM19.8 billion on a quarter-on-quarter basis to record an annual growth rate of 5.6% as at end-June (end-March: 5.9%). The increase in M3 during the quarter was driven by the continued expansion in credit extended to the private sector by the banking system and higher net claims on the Government.

Total gross financing raised by the private sector through the banking system and the capital market amounted to RM281 billion in the second quarter (1Q 2014: RM282.2 billion). On a net basis, outstanding banking system loans and PDS expanded at an annual growth rate of 9.1% as at end-June (end-March 2014: 9.6%). Net funds raised in the capital market were lower at RM17.2 billion in the second quarter (1Q 2014: RM39.4 billion).

The ringgit and most other regional currencies appreciated against the US dollar as sound regional growth prospects and the continued highly accommodative monetary policy in the US sustained investor interest in regional financial markets. Positive sentiments following the release of better-than-expected domestic economic data, particularly the strong first quarter economic growth and a stronger pace of export growth, also supported the ringgit. Overall, the ringgit appreciated by 1.8% against the US dollar. The ringgit also appreciated against the euro (2.6%) and Japanese yen (0.3%), but


36

depreciated against the pound sterling (-0.6%) and Australian dollar (-0.2%). Against regional currencies, ringgit performance was mixed.

Between 1 July and 13 August 2014, the ringgit appreciated against the US dollar by 0.6%. The ringgit also appreciated against the euro (2.7%), Australian dollar (2.1%), pound sterling (2%) and Japanese yen (1.6%). The ringgit’s performance against regional currencies was mixed. Financial stability continued to be preserved The Malaysian financial system exhibited continued resilience in the second quarter amid improved conditions in the global and domestic financial markets. Financial intermediation remained well-supported by sound financial institutions, orderly financial market conditions and sustained confidence in the financial system.

Capitalisation of the banking system remained high, with the common equity tier 1 (CET1) capital ratio, tier 1 capital ratio and total capital ratio well above the minimum regulatory levels, at 12.2%, 13% and 14.8%, respectively. The total capital buffer of the banking system stood at more than RM80 billion. Similarly, the capital adequacy ratio of the insurance sector remained strong at 249.7% (1Q 2014: 249.7%), with an excess capital buffer of RM25.7 billion.

The Malaysian economy to remain on a steady growth path

Going forward, the global economy is expected to continue on a moderate growth path. Recent improvements in economic activity suggest that a cyclical recovery remains underway in some advanced economies. This will continue to benefit international trade activity. In Asia, domestic demand is expected to remain supportive of growth. Nevertheless, country-specific developments may affect the overall pace of growth in these economies. The overall balance of risks for the global economy thus remains biased towards the downside due to uncertainty over policy adjustments in the key economies as well as geopolitical developments. Persistent geopolitical tensions in Eastern Europe and the Middle East could heighten financial market volatility and weigh down on the ongoing global economic recovery.

For the Malaysian economy, growth of exports is expected to moderate slightly in the second half of the year, partly reflecting the significant base effect in the corresponding period in 2013. Nevertheless, leading indicators suggest that private sector activity will remain as the key driver of growth. Exports will continue to benefit from the recovery in the advanced economies and from regional demand. Going forward, the Malaysian economy is expected to remain on a steady growth path.

37


DEVELOPMENTS IN THE SECOND QUARTER OF 2014

INTERNATIONAL ECONOMIC ENVIRONMENT

Moderate global economic expansion

Global economic activity expanded at a moderate pace in the second quarter of 2014. Economic conditions in most advanced economies registered gradual improvements, with the recovery in the US resuming after the unusual weather-related weakness in the first quarter. Growth in Japan, however, was affected by the implementation of the consumption tax increase in April. In Asia, economic activity continued to expand, albeit at a more moderate pace in most economies. Global monetary conditions remained accommodative, despite some divergence in the direction of monetary policy in the advanced economies.

Global financial market conditions improved in the second quarter, reflecting the better economic performance in most advanced economies. The financial markets, nevertheless, remained volatile, as market sentiments were affected by geopolitical tensions in Eastern Europe and the Middle East as well as the policy developments in the advanced economies. In particular, while the expectation and subsequent announcement of monetary easing measures in the euro area lifted market sentiments during the quarter, investors’ confidence was weighed down by indications of an earlier-than-expected increase in interest rates in the US and UK. Most major equity indices also trended higher during the quarter. In Asia, while Japanese equities were initially affected by growth concerns following the implementation of the consumption tax increase in April, the downward trend reversed in May amid an improving inflation outlook and confidence that the government’s revised growth strategy will stimulate long-term growth. The announcement of measures to liberalise PR China’s capital markets and improvements in its economic data also supported investors’ confidence in the region.

Growth in the US economy improved to 2.4% in the second quarter (1Q 2014: 1.9%). On a seasonally adjusted basis, the economy

rebounded to expand by 4% (1Q 2014: -2.1%). In terms of the components of growth, both consumer spending and business investment improved moderately, with support from higher motor vehicle and equipment spending. Similarly, labour market conditions remained favourable during the quarter, as job creation increased to 831,000 (1Q 2014: 569,000) amid higher employment in the services and public sectors. Headline inflation rose to 2.1% (1Q 2014: 1.4%), reflecting the higher cost of food, medicines and medical supplies.

Recovery in the euro area remained gradual in the second quarter. Higher external demand continued to benefit export performance, while domestic demand was supported by more accommodative monetary conditions and a slower pace of fiscal consolidation. Overall demand conditions, nevertheless, remained weak amid high unemployment, tight credit conditions and ongoing balance sheet adjustments by both the public and private sectors. Inflation moderated to 0.6% (1Q 2014: 0.7%), due to lower prices for food and non-energy industrial goods.

Economic activity in the UK grew by 3.1% in the second quarter (1Q 2014: 3%). The services sector remained the key contributor to growth, with a broad-based expansion across all sub-sectors. The inflation rate moderated slightly to 1.6% (1Q 2014: 1.7%) amid lower food inflation.

In Japan, economic activity contracted (-0.1%; 1Q 2014: 3%) following the implementation of the consumption tax increase on 1 April. Growth of private consumption declined by 2.5% (1Q 2014: +3.5%) amid lower retail spending, while weaker business sentiment resulted in a moderation in investment activity (5.3%; 1Q 2014: 11.6%). In the external sector, exports slowed (5.5%; 1Q 2014: 9.4%), due mainly to lower shipments to Asia and the US. Inflation (excluding fresh food) rose (3.3%; 1Q 2014: 1.3%) due mainly to the consumption tax increase. Core inflation (excluding food and energy) also increased to 2.3% (1Q 2014: 0.7%).


38

entitled to borrow up to 7% of their outstanding loans to the euro area private sector, excluding household mortgages, at a low rate from the ECB. The ECB also announced that preparatory work related to outright purchases of asset-backed securities will be intensified. Meanwhile, the Bank of Japan (BoJ) reaffirmed its commitment to maintain an accommodative monetary policy stance amid the subdued economic recovery.

In Asia, growth continued to expand, albeit at a more moderate pace, in several economies on account of country-specific developments. In Singapore and Korea, growth was lower at 2.4% (1Q 2014: 4.8%) and 3.6% (1Q 2014: 3.9%), respectively, attributable mainly to subdued private consumption and investment activities. In Indonesia, the slightly lower growth of 5.1% (1Q 2014: 5.2%), reflected the decline in government consumption and the slower investment. Nevertheless, growth in PR China expanded at a slightly faster pace of 7.5% (1Q 2014: 7.4%), supported by a broad-based improvement across all industries. Chinese Taipei also registered higher growth (3.8%; 1Q 2014: 3.1%), underpinned by stronger investment and government consumption.

2013 2014

2Q 1H 1Q 2Q 1H

Annual Change (%)

US 1.8r 1.7r 1.9r 2.4a 2.2a

UK 1.8 1.2 3.0 3.1p 3.0p

Japan 1.2 0.6 3.0 -0.1p 1.4p

a Advance estimatep Preliminaryr Revised

Source: National authorities

2013 2014

S2 ST1 S1 S2 ST1

Perubahan Tahunan (%)

AS 1.8d 1.7d 1.9d 2.4a 2.2a

UK 1.8 1.2 3.0 3.1p 3.0p

Jepun 1.2 0.6 3.0 -0.1p 1.4p

Ekonomi Maju: Pertumbuhan KDNK Benar

a Anggaran awalp Awaland Disemak

Sumber: Pihak berkuasa negara

Advanced Economies: Real GDP Growth

2013 2014

2Q 1H 1Q 2Q 1H

Annual Change (%)

PR China

Indonesia

Korea

Singapore

Chinese Taipei

7.5

5.8

2.7

4.0

2.7

7.6

5.9

2.4

2.8

2.1

7.4

5.2

3.9

4.8r

3.1

7.5

5.1

3.6a

2.4r

3.8a

7.5

5.2

3.8a

3.6r

3.5a

Regional Countries: Real GDP Growth

a Advance estimater Revised Source: National authorities

2013 2014

S2 ST1 S1 S2 ST1


RR China 7.5 7.6 7.4 7.5 7.5

Indonesia 5.8 5.9 5.2 5.1 5.2

Korea 2.7 2.4 3.9 3.6a 3.8a

Singapura 4.0 2.8 4.8d 2.4d 3.6d

China Taipei 2.7 2.1 3.1 3.8a 3.5a

Negara Serantau: Pertumbuhan KDNK Benar

a Anggaran awald Disemak Sumber: Pihak berkuasa negara

The direction of monetary policy in the advanced economies diverged in the second quarter. The overall monetary policy stance, nevertheless, remained highly accommodative for all of these economies. In the US, the Federal Reserve (Fed) continued to reduce the pace of its asset purchases by USD10 billion following each meeting, lowering total asset purchases to USD25 billion from August 2014 (April 2014: USD55 billion; December 2013: USD85 billion). During the Federal Open Market Committee (FOMC) meeting in June, the Fed also lowered its growth forecast for 2014 to 2.1% - 2.3% (Previous: 2.8% - 3%), due mainly to the lower-than-expected economic performance in the first quarter, while the unemployment rate projection for 2014 was revised down to 6.0% - 6.1% (Previous: 6.1% - 6.3%). Based on these projections, the Fed signalled, in its June FOMC minutes, that it may end the asset purchase programme in October 2014, if the recovery remains on track and if inflation returned towards its longer-run target of 2%. In the UK, the Bank of England (BoE) also signalled the potential for monetary policy normalisation should economic activity continue to gain momentum.

In contrast, the European Central Bank (ECB) implemented further monetary easing in June to support credit conditions, stimulate economic growth and reduce the risk of deflation. Measures undertaken include reducing the main refinancing rate (repo rate) to 0.15% (Previous: 0.25%), lowering the marginal lending rate and deposit rate to 0.40% and -0.10%, respectively, and suspending sterilisation operations under the Securities Market Programme to increase liquidity in the banking system. A series of targeted longer-term refinancing operations (TLTRO) was also introduced, where banks are

Headline inflation rose in most Asian economies due mainly to higher food inflation, particularly in the Philippines, Singapore, Chinese Taipei, Korea and Thailand. In contrast, inflation in Hong Kong and Indonesia moderated, attributable to the lower cost of housing, transportation and communications. In PR China, inflation remained steady as higher healthcare and clothing prices were offset by lower housing and recreation costs.

39


Amid moderate economic growth during the quarter, most central banks in the region maintained their key policy rates. The Bank of Thailand, Bank of Korea and Bank Indonesia kept their policy rates unchanged at 2.00%, 2.50% and 7.50% respectively. In July, Bangko Sentral ng Pilipinas raised its key policy rate by 25 basis points to 3.75% as a pre-emptive response to signs of increasing inflationary pressures and elevated inflation expectations.

The Brent crude oil price rose to an average of USD110 per barrel (1Q 2014: USD108 per barrel) during the quarter. Prices remained elevated during the quarter, driven mainly by concerns over potential supply disruptions arising from geopolitical tensions in Eastern Europe and the Middle East, as well as increasing demand from PR China, where oil consumption increased to 10.2 million barrels per day (1Q 2014: 10 million barrels per day). On 18 June, escalating tensions in Iraq, the second largest oil producer in OPEC, led to prices reaching the highest level in 2014 (USD115 per barrel). Nevertheless, as there were no actual supply disruptions to Iraqi oil supply, the Brent crude oil price moderated to USD112 per barrel by the end of the quarter.

Most major and regional currencies ended the quarter higher against the US dollar. In the advanced economies, the Japanese yen benefitted from safe haven demand following rising geopolitical tensions in Eastern

Europe and the Middle East. The pound sterling appreciated following indications of the possibility of an earlier-than-expected interest rate hike by the Bank of England. In contrast, the euro depreciated on expectations, and the subsequent announcement, of further monetary easing by the ECB. In Asia, most currencies ended the quarter higher against the US dollar. The Korean won rose to a six-year high on account of the country’s higher-than-expected current account surplus. The Indonesian rupiah, however, depreciated as investor sentiments were affected by uncertainty as the country went to the polls and the prospects for the country’s current account deficit to worsen in the second quarter of 2014.

Going forward, the global economy is expected to continue on a moderate growth path. Recent improvements in economic activity suggest that a cyclical recovery remains underway in some advanced economies. This will continue to benefit international trade activity. In Asia, domestic demand is expected to remain supportive of growth. Nevertheless, country-specific developments may affect the overall pace of growth in these economies. The overall balance of risks for the global economy thus remains biased towards the downside due to uncertainty over policy adjustments in the key economies as well as geopolitical developments. Persistent geopolitical tensions in Eastern Europe and the Middle East could heighten financial market volatility and weigh down on the ongoing global economic recovery.


40

DEVELOPMENTS IN THE MALAYSIAN ECONOMY

Stronger growth in the second quarter

The Malaysian economy registered a strong growth of 6.4% in the second quarter of 2014 (1Q 2014: 6.2%). Overall, growth was supported by higher exports and continued strength in private domestic demand. Real exports of goods and services grew at a faster pace while growth in real imports of goods and services moderated, resulting in a significant improvement in net exports. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.8% (1Q 2014: 0.8%).

Domestic demand supported by private sector activity

Domestic demand grew by 5.7% in the second quarter of 2014 (1Q 2014: 7.4%). Private sector activity remained the key driver of growth during the quarter amid strong investment and consumption. Public sector spending declined during the quarter, due to lower public investment and consumption.

Private sector activity grew by 8.1% (1Q 2014: 8.8%), above its long-term average of 6.9%. Private investment continued to register double-digit growth, expanding by 12.1% (1Q 2014: 14.1%). The robust performance was accounted mainly by investments in the services sector, particularly in dwellings, transportation and private education, and in the export-oriented

manufacturing industry. Private consumption increased by 6.5% (1Q 2014: 7.1%) in the second quarter. Household spending remained supported by stable employment conditions and continued wage growth.

By contrast, public sector expenditure declined by 2.1% (1Q 2014: 2.7%). Public consumption declined marginally by 1.3% (1Q 2014: 11.2%), reflecting mainly lower Government spending on emoluments, and supplies and services. Public investment declined during the quarter, albeit at a slower pace of 3.3% (1Q 2014: -6.4%), attributed to lower spending on fixed assets by both the Federal Government and public enterprises.

In terms of total investment, gross fixed capital formation expanded by 7.2% (1Q 2014: 6.3%). By type of assets, this was driven by spending on machinery and equipment (9.1%; 1Q 2014: -1.8%), amidst a moderation of investment in structures (6.7%; 1Q 2014: 14.7%).

GFCF by Type of Assets

% share to real GFCF

Structures Machinery & equipment Other assets*

*Other assets include mineral exploration, research & development, etc


2011 2012 2013 2014 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q9.6 9.2 8.4 8.6 8.1 8.8 7.8 8.9 8.1 9.0 7.6 8.4

44.7 47.1 45.1 42.8 44.9 45.1 45.8 40.1 44.1 43.4 42.3 40.8

45.7 43.6 46.5 48.6 47.1 46.2 46.4 51.0 47.8 47.5 50.1 50.8

0

20

40

60

80

100

Strong growth in major economic sectors

On the supply side, growth in the major economic sectors remained strong. The services sector recorded sustained growth, supported mainly by the trade-related sub-sectors. The manufacturing sector expanded at a faster pace underpinned by the electronics and electrical cluster, particularly semiconductors. The construction sector expanded at a more moderate pace, driven mainly by the residential and non-residential sub-sectors. Meanwhile, the agriculture sector registered strong growth, reflecting higher production of palm oil. The mining sector turned

GDP by Expenditure Components (at constant 2005 prices)

2013 2014

2Q 1H 1Q 2Q 1H

Annual change (%)

Aggregate Domestic Demand (excluding stocks)

Private Sector ConsumptionInvestment

Public sectorConsumptionInvestment

Net ExportsExports of Goods and ServicesImports of Goods and Services

7.28.06.8

11.1

4.711.9-3.8

-37.1-4.4-1.3

7.37.66.6

10.6

6.56.46.6

-23.7-3.9-1.8

7.48.87.1

14.1

2.711.2-6.4

14.97.97.1

5.78.16.5

12.1

-2.1-1.3-3.3

91.08.83.9

6.58.46.8

13.0

0.24.4

-4.9

42.98.35.5

GDP 4.5 4.4 6.2 6.4 6.3

GDP (q-o-q growth, seasonallyadjusted) 1.6 n.a. 0.8 1.8 n.a.


KDNK Mengikut Komponen Perbelanjaan (pada harga malar tahun 2005)

2013 2014

S2 ST1 S1 S2 ST1

Perubahan tahunan (%)

Permintaan Dalam Negeri Agregat (tidak termasuk stok)

Sektor swastaPenggunaanPembentukan Modal Tetap

Kasar

Sektor awamPenggunaanPembentukan Modal Tetap

Kasar

Eksport BersihEksport Barangan dan

PerkhidmatanImport Barangan dan

Perkhidmatan

7.28.06.8

11.1

4.711.9

-3.8

-37.1

-4.4

-1.3

7.37.66.6

10.6

6.56.4

6.6

-23.7

-3.9

-1.8

7.48.87.1

14.1

2.711.2

-6.4

14.9

7.9

7.1

5.78.16.5

12.1

-2.1-1.3

-3.3

91.0

8.8

3.9

6.58.46.8

13.0

0.24.4

-4.9

42.9

8.3

5.5

KDNK 4.5 4.4 6.2 6.4 6.3

KDNK (Suku tahunan terlaras secara bermusim) 1.6 t.d. 0.8 1.8 t.d.

Sumber: Jabatan Perangkaan Malaysia

41


Share2013(%)

2013 2014

2Q 1H 1Q 2Q 1H

Annual change (%)

Intermediate Services 40.8 4.0 5.2 5.8 4.6 5.2

Finance & insurance Real estate & business servicesTransport & storage Communication

16.610.36.67.4

-0.16.94.29.8

3.06.74.09.4

2.48.64.8

10.2

0.67.44.69.8

1.58.04.7

10.0

Final Services 59.2 5.7 5.8 7.1 7.0 7.1

Wholesale & retail tradeAccommodation & restaurantUtilities Government servicesOther services

26.14.54.5

15.09.1

5.24.94.17.85.3

5.45.74.07.55.2

8.66.13.27.74.8

9.15.62.76.64.5

8.95.92.97.14.6

Total Services 100.01 5.0 5.5 6.6 6.0 6.3

Performance of the Services Sector (value added at constant 2005 prices)

1 Numbers do not add up due to rounding


Bahagian2013(%)

2013 2014

S2 ST1 S1 S2 ST1


Perkhidmatan Pengantara 40.8 4.0 5.2 5.8 4.6 5.2

Kewangan & insuransHarta tanah & perkhidmatan perniagaanPengangkutan & penyimpananKomunikasi

16.610.36.67.4

-0.16.94.29.8

3.06.74.09.4

2.48.64.8

10.2

0.67.44.69.8

1.58.04.7

10.0

Perkhidmatan Akhir 59.2 5.7 5.8 7.1 7.0 7.1

Perdagangan borong & runcitPenginapan & restoranUtilitiPerkhidmatan KerajaanPerkhidmatan lain

26.14.54.5

15.09.1

5.24.94.17.85.3

5.45.74.07.55.2

8.66.13.27.74.8

9.15.62.76.64.5

8.95.92.97.14.6

Jumlah Perkhidmatan 100.01 5.0 5.5 6.6 6.0 6.3

Prestasi Sektor Perkhidmatan (nilai ditambah pada harga malar tahun 2005)

1 Angka-angka tidak terjumlah disebabkan oleh penggenapan


2013 2014

2Q 1H 1Q 2Q 1H

Index

MIER Consumer Sentiment IndexMIER Retail Trade IndexMIER Tourism Market Index

109.7104.9112.6

116.3103.0114.1

96.886.3

115.8

100.189.696.7

98.588.0

106.3

Annual change (%)

Tourist arrivalsTotal passenger traffi c at all airportsTotal consumption credit outstandingTotal loans outstandingLoans outstanding to the wholesale & retail trade, hotels & restaurantsImports of consumption goodsTotal sales of motor vehiclesContainer cargo handled (Port Klang and PTP)

0.618.96.69.1

14.512.4-4.30.5

7.914.06.99.8

14.27.84.10.1

10.018.94.8

10.26.4

15.61.43.7

n.a.7.01

4.49.36.47.1

11.27.2

n.a.13.92

4.910.16.9

11.16.35.5

Selected Quarterly Indicators in the Services Sector

1 April-May 20142 Jan-May 2014

Source: Various sources

2013 2014

S2 ST1 S1 S2 ST1

Indeks

Indeks Sentimen Pengguna MIERIndeks Perdagangan Runcit MIERIndeks Pasaran Pelancongan MIER

109.7104.9112.6

116.3103.0114.1

96.886.3

115.8

100.189.696.7

98.588.0

106.3


Ketibaan pelancongJumlah penumpang di kesemua lapangan terbang Jumlah kredit penggunaan terkumpulJumlah pinjaman terkumpulPinjaman terkumpul kepada perdagangan borong & runcit, hotel & restoran Import barangan penggunaanJumlah jualan kenderaan bermotorKargo kontena yang dikendali (Pelabuhan Klang dan PTP)

0.618.96.69.1

14.512.4-4.30.5

7.914.06.99.8

14.27.84.10.1

10.018.94.8

10.26.4

15.61.43.7

t.d.7.01

4.49.36.47.1

11.27.2

t.d.13.92

4.910.16.9

11.16.35.5

Penunjuk Suku Tahunan Terpilih Sektor Perkhidmatan

1 April-Mei 20142 Jan-Mei 2014

Sumber: Pelbagai sumber

around to record positive growth, due mainly to higher production of both natural gas and crude oil.

The services sector registered a sustained growth of 6.0% in the second quarter (1Q 2014: 6.6%). The wholesale and retail trade sub-sector recorded a higher growth of 9.1% (1Q 2014: 8.6%), underpinned by an expansion in the wholesale segment, in tandem with higher trade activity. Growth of the transportation and storage sub-sector was sustained (4.6%; 1Q 2014: 4.8%) supported by land transportation and port activity. In the communication sub-sector, growth remained robust (9.8%; 1Q 2014: 10.2%), driven by strong demand for data communication

Share2013(%)

2013 2014

2Q 1H 1Q 2Q 1H

Annual change (%)

AgricultureMiningManufacturingConstructionServices

7.18.1

24.53.8

55.2

0.34.43.8

10.05.0

3.21.32.1

12.05.5

2.3-0.86.8

18.96.6

7.12.17.39.96.0

4.60.67.1

14.36.3

Real GDP 100.01 4.5 4.4 6.2 6.4 6.3

Real GDP (q-o-qseasonally adjusted) - 1.6 - 0.8 1.8 -1 Numbers do not add up due to rounding and exclusion of import duties component


Bahagian2013(%)

2013 2014

S2 ST1 S1 S2 ST1


PertanianPerlombonganPerkilanganPembinaanPerkhidmatan

7.18.1

24.53.8

55.2

0.34.43.8

10.05.0

3.21.32.1

12.05.5

2.3-0.86.8

18.96.6

7.12.17.39.96.0

4.60.67.1

14.36.3

KDNK Benar 100.01 4.5 4.4 6.2 6.4 6.3

KDNK Benar (Suku tahunan terlaras secara bermusim) - 1.6 - 0.8 1.8 -

KDNK Mengikut Aktiviti Ekonomi (pada harga malar tahun 2005)

1 Angka-angka tidak terjumlah disebabkan oleh penggenapan dan pengecualian komponen duti import


GDP by Economic Activity (at constant 2005 prices)


42

services amid attractive deals offered by telecommunication companies. Growth in the real estate and business services sub-sector remained strong (7.4%; 1Q 2014: 8.6%), underpinned mainly by the business services segment. The finance and insurance sub-sector registered a marginal growth of 0.6% (1Q 2014: 2.4%) reflecting the lower growth in net interest income and fee-based income.

The manufacturing sector recorded a strong growth of 7.3% in the second quarter (1Q 2014: 6.8%), driven by the strong performance of the electronics and electrical cluster, particularly semiconductors. This was also supported by better performance of the domestic-oriented cluster, particularly the manufactures of transport equipment, and food, beverage and tobacco. Overall capacity utilisation rate in the manufacturing sector was sustained at 78% (1Q 2014: 78%). Export-oriented industries were operating at 79% (1Q 2014: 79%), while

Share2013(%)

2013 2014

2Q 1H 1Q 2Q 1H

Annual Change (%)

Value Added (RM million at constant 2005 prices) 100.0 3.8 2.1 6.8 7.3 7.1

Export-oriented industries 61.5 1.3 0.3 6.9 5.0 6.0

Domestic-oriented industries 38.5 7.7 5.4 6.7 10.9 9.0

Overall Manufacturing Production1 100.0 5.2 2.5 6.9 7.4 7.2

Export-oriented industriesElectronics and electrical products cluster

Of which:ElectronicsElectrical products

Primary-related clusterOf which:

Chemicals and chemical productsPetroleum productsRubber productsOff-estate processing

Domestic-oriented industriesConstruction-related cluster

Of which:Construction-related products Fabricated metal products

Consumer-related clusterOf which:

Transport equipmentFood, beverage & tobacco products

74.824.2

15.38.9

50.7

14.321.02.54.5

25.211.3

8.23.1

13.8

5.57.3

4.18.1

17.1-7.72.2

6.05.84.9

-0.2

8.66.1

-1.221.910.9

24.82.9

1.45.5

13.8-8.4-0.4

-1.6-1.89.25.1

5.85.6

0.216.95.9

10.73.8

6.614.6

19.15.43.0

1.26.51.30.9

7.83.2

1.26.9

11.8

19.15.7

5.413.6

15.49.51.3

-1.4-0.4-2.712.2

12.94.6

6.61.2

20.2

29.314.8

6.014.1

17.27.52.1

-0.23.1

-0.76.4

10.43.9

4.03.8

16.1

24.410.2

Performance of the Manufacturing Sector

1 Industrial Production Index (2010=100) Source: Department of Statistics, Malaysia

Bahagian2013(%)

2013 2014

S2 ST1 S1 S2 ST1


Nilai Ditambah (RM juta pada harga malar tahun 2005) 100.0 3.8 2.1 6.8 7.3 7.1

Industri berorientasikan eksport 61.5 1.3 0.3 6.9 5.0 6.0

Industri berorientasikan pasaran dalam negeri 38.5 7.7 5.4 6.7 10.9 9.0

Pengeluaran Perkilangan Keseluruhan1 100.0 5.2 2.5 6.9 7.4 7.2

Industri berorientasikan eksportKelompok elektronik dan keluaran elektrik

Antaranya:ElektronikKeluaran elektrik

Kelompok keluaran berkaitan sumberAntaranya:

Kimia dan keluaran kimiaKeluaran petroleumKeluaran getahPemprosesan di luar estet

Industri berorientasikan pasaran dalam negeriKelompok berkaitan pembinaan

Antaranya:Keluaran berkaitan pembinaan Keluaran logam yang direka

Kelompok keluaran berkaitan penggunaAntaranya:

Kelengkapan pengangkutanMakanan, minuman & keluaran tembakau

74.824.2

15.38.9

50.7

14.321.02.54.5

25.211.3

8.23.1

13.8

5.57.3

4.18.1

17.1-7.72.2

6.05.84.9

-0.2

8.66.1

-1.221.910.9

24.82.9

1.45.5

13.8-8.4-0.4

-1.6-1.89.25.1

5.85.6

0.216.95.9

10.73.8

6.614.6

19.15.43.0

1.26.51.30.9

7.83.2

1.26.9

11.8

19.15.7

5.413.6

15.49.51.3

-1.4-0.4-2.712.2

12.94.6

6.61.2

20.2

29.314.8

6.014.1

17.27.52.1

-0.23.1

-0.76.4

10.43.9

4.03.8

16.1

24.410.2

Prestasi Sektor Perkilangan

1 Indeks Pengeluaran Perindustrian (2010=100) Sumber: Jabatan Perangkaan Malaysia

capacity utilisation in the domestic-oriented industries rose to 77% (1Q 2014: 75%).

After the exceptionally strong growth in the first quarter, the construction sector recorded a more moderate pace of expansion during the quarter (9.9%; 1Q 2014: 18.9%). Growth was driven mainly by the residential sub-sector, underpinned by the construction activity of high-

Capacity utilisation rate in the manufacturing sector*

Overall Domestic-oriented industries

Export-oriented industries IPI (RHS)

Index

* Beginning 2012, the capacity utilisation rate in the manufacturing sector has been rebased from value-add in year 2006 to value-add in year 2009

Source: Bank Negara Malaysia & Department of Statistics, Malaysia

%

2010 2011 2012 2013 2014

90

100

110

120

130

50

60

70

80

90

100

2Q 1Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

43


Performance of the Agriculture Sector

Share2013(%)

2013 2014

2Q 1H 1Q 2Q 1H

Annual change (%)

Value Added (at constant 2005 prices)

Industrial CropsOf which:

Oil palmRubber

Food CropsOf which:

FishingLivestock

100.053.8

36.67.0

46.2

14.712.4

0.3-4.5

1.0

-25.2

7.1

0.68.4

3.21.5

7.6

-12.7

6.9

4.17.4

2.3-1.0

1.6-12.1

6.1

2.17.9

7.19.3

14.9

-15.0

4.6

0.46.1

4.64.2

8.1

-13.3

5.4

1.37.0


Prestasi Sektor Pertanian

Bahagian2013(%)

2013 2013

S2 ST1 S1 S2 ST1


Nilai Ditambah (pada harga malar

tahun 2005)Tanaman Industri

Antaranya:Kelapa SawitGetah

Tanaman MakananAntaranya:

PerikananTernakan

100.053.8

36.67.0

46.2

14.712.4

0.3-4.5

1.0

-25.2

7.1

0.68.4

3.21.5

7.6

-12.7

6.9

4.17.4

2.3-1.0

1.6-12.1

6.1

2.17.9

7.19.3

14.9

-15.0

4.6

0.46.1

4.64.2

8.1

-13.3

5.4

1.37.0


Share2013(%)

2013 2014

2Q 1H 1Q 2Q 1H

Annual change (%)

Value Added (at constant 2005 prices)

Production Of w vhich:

Crude oil CondensatesNatural gas

100.0

---

4.4

3.13.27.5

1.3

0.3-0.15.2

-0.8

-3.5-0.91.2

2.1

4.0-5.51.6

0.6

0.3-3.21.4

Performance of the Mining Sector

Bahagian2013(%)

2013 2014

S2 ST1 S1 S2 ST1


Nilai Ditambah (pada harga malar

tahun 2005)

Pengeluaran Antaranya:

Minyak mentah Kondensat Gas asli

100.0

---

4.4

3.13.27.5

1.3

0.3-0.15.2

-0.8

-3.5-0.91.2

2.1

4.0-5.51.6

0.6

0.3-3.21.4

Prestasi Sektor Perlombongan



end properties in Johor and Klang Valley. The non-residential sub-sector remained supported by construction activity related to offices and retail buildings, factories and institutions of higher learning. Meanwhile, growth in the civil engineering sub-sector was supported by rail and utility projects such as the MRT, LRT extension, and Tanjung Bin power plant.

The agriculture sector registered a growth of 7.1% (1Q 2014: 2.3%), largely on account of stronger palm oil production. Meanwhile, the mining sector turned around to record a positive growth of 2.1% (1Q 2014: -0.8%), due largely to higher production of both natural gas and crude oil.

Inflation moderated slightly in the second quarter

The inflation rate, as measured by the annual change in the Consumer Price Index (CPI), averaged 3.3% in the second quarter of 2014 (1Q 2014: 3.4%). The slight moderation was due to lower inflation in the food and non-alcoholic beverages category (3.5%; 1Q 2014: 4.0%), which reflected in part the base effect of the significant price increase for fresh chicken in the previous year. Inflation in the housing, water, electricity, gas and other fuels category declined to 3.3% (1Q 2014: 3.5%), reflecting the slower increase in rental across most types of property during the quarter.

The Producer Price Index (PPI) recorded an increase of 3.2% on an annual basis (1Q 2014: 3.0%). In terms of composition, prices of commodity-related and non-commodity-related components increased by 7.2% and 1.2% respectively (1Q 2014: 6.8% and 0.9% respectively) during the quarter. Meanwhile, prices of both local and imported components

2013 2014

2Q 1H 1Q 2Q 1H

Annual change (%)

Value of construction work doneResidentialNon-residentialCivil engineeringSpecial Trade1

Housing approvals

Production2 of construction-related materials

Hydraulic cementOther articles of concrete, cement

and plaster n.e.cOther porcelain and ceramic

productsPrefabricated structural components

for building or civil engineering of cement, concrete or artifi cial stone

Capital imports (excluding lumpy items)

Loans for the construction sectorApprovalDisbursement

11.625.60.5

13.83.3

-37.8

6.14.7

-2.2

-3.3

0.4

-5.4

-5.829.5

13.818.4-0.428.40.1

-29.9

5.63.9

-2.2

-6.3

1.0

0.4

-18.623.0

21.133.119.910.549.3

-47.6

3.21.3

36.9

15.2

2.6

-3.6

-32.823.3

10.818.114.51.89.8

-10.5

4.67.1

38.0

17.5

-6.2

1.7

-16.74.4

15.724.917.16.0

27.5

-28.8

3.94.3

37.5

16.4

-1.9

-0.9

-24.513.8

Indicators for the Construction Sector

1 Works such as site preparation, electrical installation and painting 2 Industrial Production Index (2010=100) Source: Department of Statistics, Malaysia, Ministry of Urban Wellbeing, Housing and Local Government and Bank Negara Malaysia

2013 2014

S2 ST1 S1 S2 ST1


Nilai kerja pembinaanKediamanBukan kediamanKejuruteraan awamPertukangan khas1

Kelulusan perumahan

Pengeluaran2 bahan berkaitan pembinaanPembuatan simen hidraulikBahan lain daripada artikel konkrit,

simen dan plaster t.t.t.lPembuatan produk porselin dan

seramik lainPembuatan komponen berstruktur

pasang siap untuk bangunan atau kejuruteraan awam daripada simen, konkrit atau batu buatan

Import barangan modal (tidak termasukbarangan besar)

Pinjaman untuk sektor pembinaanKelulusanPengeluaran

11.625.60.5

13.83.3

-37.8

6.14.7

-2.2

-3.3

0.4

-5.4

-5.829.5

13.818.4-0.428.40.1

-29.9

5.63.9

-2.2

-6.3

1.0

0.4

-18.623.0

21.133.119.910.549.3

-47.6

3.21.3

36.9

15.2

2.6

-3.6

-32.823.3

10.818.114.51.89.8

-10.5

4.67.1

38.0

17.5

-6.2

1.7

-16.74.4

15.724.917.1

6.027.5

-28.8

3.94.3

37.5

16.4

-1.9

-0.9

-24.513.8

Penunjuk bagi Sektor Pembinaan

1 Kerja-kerja seperti penyediaan tapak, pemasangan elektrik dan mengecat2 Indeks Pengeluaran Perindustrian (2010=100) Sumber: Jabatan Perangkaan Malaysia, Kementerian Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan dan Bank Negara Malaysia

Contribution to Consumer Price Inflation

1Q 2014 2Q 2014

Source: Bank Negara Malaysia

-0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

All Items

Food and non-alcoholic beverages

Housing, water, electricity, gas and other fuelsTransport

Alcoholic beverages and tobacco

Restaurants and hotels

Recreation services and cultureMiscellaneous goods and services

Furnishings, household equipment androutine household maintenance

HealthEducation

Clothing and footwear

Communication

percentage points


44

grew by 4.2% and 1.0% respectively (1Q 2014: 4.1% and 0.4% respectively).

Favourable labour market conditions Labour market conditions remained favourable during the second quarter. Total employment increased to 13.6 million persons (1Q 2014: 13.5 million) attributable to the higher employment in the manufacturing, services and mining sectors. The unemployment rate declined to 2.8% (1Q 2014: 3.1%).

Retrenchments reported to the Ministry of Human Resources decreased to 2,051 persons (1Q 2014: 2,437 persons), and these were mostly in the services and manufacturing sectors. Job vacancies posted in the JobsMalaysia Portal remained high at 246,884 positions (1Q 2014: 353,030 positions). Aggregate real wages in the manufacturing sector increased by 4.5% (1Q 2014: 3.6%), supported by higher wage growth in the export-oriented industries.

2013 2014

2Q 1H 1Q 2Q 1H

RM billion

Current Account (% of GNI)

GoodsServicesPrimary incomeSecondary income

Financial Account Direct investment

AssetsLiabilities

Portfolio investmentAssetsLiabilities

Financial derivativesOther investment

Errors & omissions2

1.80.8

19.6-5.2-8.1-4.5

4.4-8.3

-15.57.23.3

-11.414.7-1.410.8-4.7

15.03.3

47.7-7.7

-16.1-8.7

5.6-11.1-27.116.17.2

-16.723.9-1.210.6

-15.0

19.87.9

33.6-2.7-6.4-4.6

-37.6-14.6-20.4

5.8-13.4-7.6-5.8-1.5-8.10.4

16.06.3

30.1-3.6-7.7-2.8

-11.8-4.4

-16.612.26.9

-10.617.60.2

-14.5-5.2

35.87.1

63.7-6.3

-14.2-7.4

-49.3-19.0-37.018.0-6.5

-18.211.7-1.3

-22.6-4.8

Overall Balance 1.5 5.6 -17.3 -1.0 -18.3

Balance of Payments1

2013 2014

S2 ST1 S1 S2 ST1

RM bilion

Akaun Semasa (% daripada PNK)

BaranganPerkhidmatanPendapatan primerPendapatan sekunder

Akaun Kewangan Pelaburan langsung

AsetLiabiliti

Pelaburan portfolioAsetLiabiliti

Derivatif kewanganPelaburan lain

Kesilapan dan ketinggalan2

1.80.8

19.6-5.2-8.1-4.5

4.4-8.3

-15.57.23.3

-11.414.7-1.410.8-4.7

15.03.3

47.7-7.7

-16.1-8.7

5.6-11.1-27.116.17.2

-16.723.9-1.210.6

-15.0

19.87.9

33.6-2.7-6.4-4.6

-37.6-14.6-20.4

5.8-13.4-7.6-5.8-1.5-8.10.4

16.06.3

30.1-3.6-7.7-2.8

-11.8-4.4

-16.612.26.9

-10.617.60.2

-14.5-5.2

35.87.1

63.7-6.3

-14.2-7.4

-49.3-19.0-37.018.0-6.5

-18.211.7-1.3

-22.6-4.8

Imbangan Keseluruhan 1.5 5.6 -17.3 -1.0 -18.3

Imbangan Pembayaran1

Aset: (-) menunjukkan aliran keluar disebabkan oleh pemerolehan aset di luar negeri oleh pemastautin Liabiliti: (+) menunjukkan aliran masuk disebabkan oleh liabiliti asing1 Mengikut Edisi Keenam Manual Imbangan Pembayaran dan Kedudukan Pelaburan

Antarabangsa (BPM6) oleh Tabungan Kewangan Antarabangsa (IMF)2 Termasuk penambahan/pengurangan nilai rizab antarabangsa yang belum

direalisasikan hasil daripada penilaian semula pertukaran asing


Assets: (-) denotes outfl ows due to the acquisition of assets abroad by residents Liabilities: (+) denotes infl ows due to the incurrence of foreign liabilities 1 In accordance with the Sixth Edition of Balance of Payments and International

Investment Position Manual (BPM6) by the International Monetary Fund (IMF)2 Includes unrealised foreign exchange revaluation on gain/losses on

international reserves


Share 2013 (%)

2013 2014

2Q 1H 1Q 2Q 1H

Annual change (%)

Gross ExportsManufactured

E&ENon-E&E

Resource basedNon-resource based

CommoditiesMineralsAgriculture

Gross ImportsIntermediate goodsCapital goodsConsumption goodsRe-exports and dual-use goods

Trade balance (RM billion)

100.076.232.943.324.019.323.113.59.6

100.058.415.27.3

19.0

-

-5.4-2.1-3.9-0.7-1.1-0.3

-14.9-9.5

-21.2

2.53.0

-6.212.45.0

8.2

-4.0-0.8-4.42.14.3

-0.6-13.2-8.4

-19.1

4.41.63.17.8

15.2

24.6

10.812.512.512.59.1

17.06.18.82.1

5.54.4

-6.615.615.7

26.3

14.213.613.114.014.813.216.725.25.5

8.62.99.17.1

30.3

18.4

12.513.112.813.311.815.011.116.43.8

7.13.61.1

11.122.8

44.7

Note: Refi ned petroleum products has been reclassifi ed as manufactured goods from mining goods, effective May 2014. Source: MATRADE and Department of Statistics, Malaysia

Bahagian 2013 (%)

2013 2014

S2 ST1 S1 S2 ST1


Eksport KasarPerkilanganE&EBukan E&EBerasaskan sumber Bukan berasaskansumber

KomoditiMineralPertanian

Import KasarBarangan pengantaraBarangan modalBarangan penggunaanEksport semula danbarangan dua kegunaan

Imbangan perdagangan (RM bilion)

100.076.232.943.324.0

19.323.113.59.6

100.058.415.27.3

19.0

-

-5.4-2.1-3.9-0.7-1.1

-0.3-14.9-9.5

-21.2

2.53.0

-6.212.4

5.0

8.2

-4.0-0.8-4.42.14.3

-0.6-13.2-8.4

-19.1

4.41.63.17.8

15.2

24.6

10.812.512.512.59.1

17.06.18.82.1

5.54.4

-6.615.6

15.7

26.3

14.213.613.114.014.8

13.216.725.25.5

8.62.99.17.1

30.3

18.4

12.513.112.813.311.8

15.011.116.43.8

7.13.61.1

11.1

22.8

44.7

Akaun Perdagangan

Nota: Keluaran petroleum ditapis telah diklasifi kasikan semula sebagai barangan perkilangan dan bukan lagi barangan perlombongan mulai bulan Mei 2014 Sumber: MATRADE dan Jabatan Perangkaan Malaysia

Trade Account

Kekosongan Jawatan (skala kiri) Pemberhentian Pekerja (skala kanan)

Sumber: Kementerian Sumber Manusia

Keadaan Pasaran Pekerja

Kekosongan Jawatan ('000 jawatan) Pemberhentian Pekerja (bil. org)

0 1,000 2,000 3,000 4,000 5,000

0 200 400 600 800

1000

S1 S2 S3 S4 S1 S2 S3 S4 S1 S2

2012 2013 2014

Labour Market Conditions

Vacancies (LHS) Retrenchments (RHS)

Source: Ministry of Human Resources

Vacancies ('000 positions) Retrenchments (persons)

0 1,000 2,000 3,000 4,000 5,000

0 200 400 600 800

1000

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2012 2013 2014

The expansion in gross exports was broad-based. The improvement in manufactured exports was attributed to a higher growth of both E&E and non-E&E products, and a low base from the second quarter of 2013. E&E exports continued to record double-digit growth, driven by strong demand for semiconductors, while the improvement in non-E&E exports was supported by stronger demand for resource-based products. Commodity exports grew at a

External position remained strong in the second quarter

The current account surplus moderated to RM16 billion in the second quarter, equivalent to 6.3% of GNI (1Q 2014: RM19.8 billion or 7.9% of GNI). The current account surplus was lower on account of a smaller surplus in the goods account and a higher deficit in the services and primary income accounts.

The trade surplus amounted to RM18.4 billion in the second quarter (1Q 2014: RM26.3 billion). Gross exports grew at a stronger pace of 14.2%(1Q 2014: 10.8%), benefiting from the continued expansion of global economic activity. Gross imports also improved, registering growth of 8.6% (1Q 2014: 5.5%).

45


faster pace, underpinned by higher demand for crude petroleum and LNG. Higher prices of crude petroleum and palm oil also supported export growth during the quarter. In terms of destination, exports to the major advanced economies improved. In particular, exports to the US grew at a faster pace in line with the improvements in the US economy. Exports to the ASEAN region also increased.

Gross imports expanded at a faster pace in the second quarter due to a stronger growth of re-exports and a rebound in capital imports. The continued double-digit growth in imports for re-exports reflected the expansion of storage activities in southern Johor, catering mainly to refined petroleum and metals. The rebound in capital imports was due mainly to the increase in imports of transport equipment. Intermediate imports continued to expand, supported by the strong performance of manufactured exports during the quarter. Meanwhile, imports of consumption goods increased at a slower pace, reflecting lower imports of processed food and beverages and non-durable consumer goods.

The deficit in the services account widened to RM3.6 billion in the second quarter (1Q 2014: -RM2.7 billion). The higher deficit was due mainly to larger net outflows in the transportation account and to a lesser extent, a decrease in net travel receipts. The increase in payments for transport services was in line with the improvement in trade activity in the

second quarter, while the decrease in net travel receipts was attributable to a lower number of tourist arrivals. The deficit in the primary income balance widened to RM7.7 billion (1Q 2014: -RM6.4 billion), as investment income accrued to foreign direct investors in the services sector increased, and investment income accrued to the manufacturing and mining sectors was sustained. Investment income accrued to Malaysian companies investing abroad was broadly sustained, mainly supported by income accrued to the mining sector and the services sector, in particular the finance and insurance sub-sector.

The financial account registered lower net outflows of RM11.8 billion in the second quarter (1Q 2014: -RM37.6 billion), mainly accounted for by smaller net outflows in direct investment and resumption of net portfolio inflows.

Inward direct investment (direct investment liabilities) registered larger inflows of RM12.2 billion (1Q 2014: +RM5.8 billion), supported by higher extensions of equity capital and reinvestment of earnings. These inflows were channelled mainly into companies in the services sector, particularly in the finance and insurance services sub-sector, as well as in the mining and the manufacturing sectors.

On the assets side, outward direct investment remained high with outflows amounting to RM16.6 billion (1Q 2014: -RM20.4 billion),

Share 2013 (%)

2013 2014

2Q 1H 1Q 2Q 1H

Annual change (%)

United StatesEuropean Union (EU)JapanSelected ASEAN countries1

North East Asia People’s Republic of ChinaHong Kong SARKoreaChinese Taipei

West Asia2

IndiaTotal exports

8.19.1

11.127.624.413.54.33.62.93.43.6

100.0

-4.7-3.4-9.50.8

-10.1-9.6-9.4-9.2

-14.55.4

-10.2-5.4

-3.8-4.9-9.55.3

-7.8-5.9-9.2-6.4

-15.62.2

-7.0-4.0

4.218.59.22.9

20.215.335.015.928.1-0.79.1

10.8

13.415.98.2

13.316.63.6

41.410.344.6-9.118.714.2

8.917.18.78.0

18.39.3

38.413.436.8-5.214.212.5

1 Singapore, Thailand, Indonesia, Philippines, Brunei Darussalam and Vietnam 2 United Arab Emirates, Saudi Arabia, Oman, Iraq, Qatar, Kuwait, Jordan, Lebanon, Bahrain, Syria, Palestine, Yemen and Iran Source: Department of Statistics, Malaysia

Bahagian 2013 (%)

2013 2014

S2 ST1 S1 S2 ST1


Amerika SyarikatKesatuan Eropah (EU)JepunNegara ASEAN terpilih1

Timur Laut Asia Republik Rakyat ChinaHong Kong SARKoreaChina Taipei

Asia Barat2

IndiaJumlah eksport

8.19.1

11.127.624.413.54.33.62.93.43.6

100.0

-4.7-3.4-9.50.8

-10.1-9.6-9.4-9.2

-14.55.4

-10.2-5.4

-3.8-4.9-9.55.3

-7.8-5.9-9.2-6.4

-15.62.2

-7.0-4.0

4.218.59.22.9

20.215.335.015.928.1-0.79.1

10.8

13.415.98.2

13.316.63.6

41.410.344.6-9.118.714.2

8.917.18.78.0

18.39.3

38.413.436.8-5.214.212.5

Malaysia: Destinasi Eksport

1 Singapura, Thailand, Indonesia, Filipina, Brunei Darussalam dan Vietnam 2 Emiriah Arab Bersatu, Arab Saudi, Oman, Iraq, Qatar, Kuwait, Jordan, Lebanon, Bahrain, Syria, Palestin, Yemen dan Iran Sumber: Jabatan Perangkaan Malaysia

Malaysia: Direction of Exports


46

1 For more information, please refer to the box article entitled ‘The Redefinition of External Debt’ in the Quarterly Bulletin on Economic and Financial Developments in the Malaysian Economy in the First Quarter of 2014.

2 Equivalent to the external debt under the previous definition.

attributed to continued large extensions of intercompany loans to finance the operation of Malaysian companies abroad. These investments were accounted mainly by companies in the mining and services sectors, particularly in the information and communications sub-sector.

Portfolio investment turned around to register a net inflow of RM6.9 billion (1Q 2014: -RM13.4 billion). During the quarter, favourable economic data releases in major economies and expectations of higher policy rate in Malaysia led to a resumption of non-resident portfolio inflows. Meanwhile, resident investors continued to acquire portfolio assets abroad.

Other investments recorded a sustained net outflow of RM14.5 billion (1Q 2014: -RM8.1 billion), as net outflows from the non-bank corporates outweighed a small net inflow in the banking sector. In addition, there was also sustained extension of trade credits by exporters.

Following these developments, the overall balance of payments registered a small deficit of RM1 billion (1Q 2014: -RM17.3 billion). Errors and omissions (E&O) amounted to -RM5.2 billion, and partly reflected foreign exchange revaluation losses on international reserves, as the ringgit appreciated against major currencies during the quarter.

Marginal increase in external debt

Malaysia’s redefined external debt1 stood at RM729 billion, equivalent to USD224.7 billion or 67.9% of GDP as at end-June 2014 (end-March 2014: RM702.3 billion or USD213.2 billion, equivalent to 65.4% of GDP). The higher external debt was attributed to the increases in non-resident holdings of ringgit-denominated debt securities and deposits, as well as higher offshore borrowing.

Offshore borrowing2 increased to RM335.6 billion as at end-June (end-March 2014: RM327.9 billion). The higher medium- and long-term offshore borrowing reflected mainly the net borrowing by private sector companies and public enterprises, which offset the net repayment by the Federal Government. Meanwhile, short-term offshore borrowing increased due to higher interbank borrowing.

The rise in offshore borrowing during the quarter was partly offset by the strengthening of the ringgit against selected regional and major currencies.

The non-resident holdings of ringgit-denominated debt securities issued by the Federal Government, Bank Negara Malaysia and corporations increased to RM243 billion as at end-June 2014 (end-March 2014: RM231.4 billion), with the increase mainly in the holdings of medium- and long-term debt securities, reflecting investors’ confidence in the Malaysian economy, as well as the attraction of the higher yields of these maturities. The high non-resident participation in Malaysia’s bond market is also a reflection of the deeper, more open and vibrant domestic financial markets. Non-resident deposits increased to RM86.2 billion as at end-June (end-March 2014: RM77.6 billion).

Overall, more than half of the total external debt has a long-term maturity profile. The short-term external debt remained manageable with reserves coverage of 1.2 times.

Hutang Luar Negeri Terkumpul2013 2014

akhir Jun akhir Mac akhir Jun

RM bilion

Pinjaman luar pesisir1

Jangka sederhana dan panjangSektor awamSektor swasta

Jangka pendek

Pemegangan bukan pemastautin sekuriti hutang domestik

Jangka sederhana dan panjangJangka pendek

Deposit bukan pemastautin

Lain-lain2

Jangka sederhana dan panjangJangka pendek

Jumlah hutang luar negeriBersamaan USD bilion

290.5176.087.888.2

114.5

227.1153.573.6

62.0

65.410.954.5

645.0200.8

327.9199.297.9

101.3128.7

231.4156.574.9

77.6

65.410.754.7

702.3213.2

335.6204.898.7

106.2130.8

243.0167.375.8

86.2

64.310.054.3

729.0224.7

Hutang luar negeri (Defi nisi terdahulu)Jumlah hutang/KDNK (%)Hutang jangka pendek3/

Jumlah hutang (%)Rizab antarabangsa/

Hutang jangka pendek3 (kali)

Hutang luar negeri (Defi nisi semula)Jumlah hutang/KDNK (%)Hutang jangka pendek4/ Jumlah hutang (%)Rizab antarabangsa/ Hutang jangka pendek4 (kali)

29.4

39.4

3.8

65.4

47.2

1.4

30.5

39.2

3.3

65.4

47.8

1.3

31.3

39.0

3.2

67.9

47.6

1.2

1 Bersamaan dengan hutang luar negeri defi nisi terdahulu, terkandung terutamanya hutang mata wang asing diperoleh, dan nota and bon terbitan luar pesisir.

2 Terkandung kredit perdagangan, peruntukan SDR IMF, dan lain-lain. 3 Bersamaan dengan pinjaman luar pesisir jangka pendek. 4 Pinjaman luar pesisir jangka pendek, pegangan bukan pemastautin sekuriti hutang

domestik jangka pendek, deposit bukan pemastautin dan hutang jangka pendek lain.

Sumber: Kementerian Kewangan Malaysia dan Bank Negara Malaysia

External Debt Outstanding2013 2014

end-June end-Mar end-June

RM billion

Offshore borrowing1

Medium- and long-termPublic sectorPrivate sector

Short-term

NR holdings of dom. debt securitiesMedium- and long-termShort-term

NR deposits

Others2

Medium- and long-termShort-term

Total external debtUSD billion equivalent

290.5176.087.888.2

114.5

227.1153.573.6

62.0

65.410.954.5

645.0200.8

327.9199.297.9

101.3128.7

231.4156.574.9

77.6

65.410.754.7

702.3213.2

335.6204.898.7

106.2130.8

243.0167.375.8

86.2

64.310.054.3

729.0224.7

External Debt (Previous defi nition)Total debt/GDP (%)Short-term debt3/Total debt (%)Reserves/Short-term debt3 (times)

External Debt (Redefi ned)Total debt/GDP (%)Short-term debt4/Total debt (%)Reserves/Short-term debt4 (times)

29.439.43.8

65.447.21.4

30.539.23.3

65.447.81.3

31.339.0

3.2

67.947.61.2

1 Equivalent to the external debt as previously defi ned, comprised mainly foreign currency loans raised, and bond and notes issued offshore.

2 Comprise trade credits, IMF allocation of SDRs and miscellaneous.3 Equivalent to short-term offshore borrowing4 Short-term offshore borrowing, NR holdings of short-term domestic debt securities, NR

deposits and other short-term debtNote: NR refers to non-residents

Source: Ministry of Finance, Malaysia and Bank Negara Malaysia

47


2013 2014

2Q 1H 1Q 2Q 1H

RM billion

Revenue % annual growthOperating expenditure % annual growthCurrent account % of GDPNet development expenditure % annual growthOverall balance % of GDP

51.61.7

49.22.02.41.06.8

-22.4-4.4-1.9

95.3-3.399.15.6

-3.7-0.815.6-7.6

-19.4-4.1

49.212.455.210.6-6.0-2.37.0

-20.9-13.0-5.1

52.72.1

51.75.20.90.47.02.7

-6.1-2.3

101.86.8

106.97.9

-5.1-1.014.0

-10.6-19.1-3.7

Memo item:Total net expenditure % annual growthTotal Federal Government debt

(as at end-period) % of GDPDomestic debt

% of GDPExternal debt1

% of GDPNon-resident holdings of RM-denominated Federal Government debt2

% of GDP Offshore borrowing

% of GDP

56.0-1.8

519.352.6

360.936.6

158.416.1

142.014.416.51.7

114.73.6

519.352.6

360.936.6

158.416.1

142.014.416.51.7

62.25.9

560.652.2

398.437.1

162.115.1

145.713.616.51.5

58.74.9

568.953.0

395.936.9

173.016.1

156.714.616.21.5

120.95.4

568.953.0

395.936.9

173.016.1

156.714.616.21.5

p Preliminary1 Refers to the redefi ned external debt 2 Refers to non-resident holdings of ringgit-denominated Government debt (MGS, GII, T-bills

and SPK), which was classifi ed as domestic debt under the previous defi nition Source: Ministry of Finance, Malaysia and Bank Negara Malaysia

2013 2014

S2 ST1 S1 S2 ST1

RM bilion

Hasil% pertumbuhan tahunan

Perbelanjaan mengurus% pertumbuhan tahunan

Akaun semasa% daripada KDNK

Perbelanjaan pembangunan bersih

% pertumbuhan tahunanImbangan keseluruhan

% daripada KDNK

51.61.7

49.22.02.41.0

6.8-22.4-4.4-1.9

95.3-3.399.15.6

-3.7-0.8

15.6-7.6

-19.4-4.1

49.212.455.210.6-6.0-2.3

7.0-20.9-13.0-5.1

52.72.1

51.75.20.90.4

7.02.7

-6.1-2.3

101.86.8

106.97.9

-5.1-1.0

14.0-10.6-19.1-3.7

Memo:Jumlah perbelanjaan bersih

% pertumbuhan tahunanJumlah hutang Kerajaan Persekutuan

(pada akhir tempoh) % daripada KDNKHutang dalam negeri

% daripada KDNKHutang luar negeri1

% daripada KDNKPemegangan hutang Kerajaan Persekutuan dalam denominasi RM oleh bukan pemastautin2

% daripada KDNKPeminjaman luar pesisir

% daripada KDNK

56.0-1.8

519.352.6

360.936.6

158.416.1

142.014.416.51.7

114.73.6

519.352.6

360.936.6

158.416.1

142.014.416.51.7

62.25.9

560.652.2

398.437.1

162.115.1

145.713.616.51.5

58.74.9

568.953.0

395.936.9

173.016.1

156.714.616.21.5

120.95.4

568.953.0

395.936.9

173.016.1

156.714.616.21.5

Kewangan Kerajaan Persekutuana

a Awalan1 Merujuk kepada hutang luar negeri yang diberikan defi nisi semula2 Merujuk kepada pemegangan hutang Kerajaan dalam denominasi ringgit oleh

bukan pemastautin (Sekuriti Kerajaan Malaysia, Terbitan Pelaburan Kerajaan, Bil-bil Perbendaharaan dan Sukuk Pinjaman Perumahan Kerajaan) yang diklasifi kasikan sebagai hutang dalam negeri di bawah defi nisi terdahulu

Sumber: Kementerian Kewangan Malaysia dan Bank Negara Malaysia

Federal Government Financep

Federal Government Finance

p PreliminarySource: Ministry of Finance, Malaysia

RM billion

Overall balance

Development expenditure Revenue

Operating expenditure

-30

-20

-10

0

10

20

30

40

50

60

70

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2012 2013p 2014p

International reserves remained ample

The international reserves of BNM amounted to RM423.6 billion (equivalent to USD131.9 billion) as at 30 June 2014. This reserve level has taken into account the quarterly adjustment for foreign exchange revaluation changes. As at 31 July 2014, the reserves position amounted to RM423.5 billion (equivalent to USD131.8 billion), sufficient to finance 9.0 months of retained imports and is 1.2 times the redefined short-term external debt.

Higher government revenue

Federal Government revenue increased in the second quarter by 2.1% on an annual basis, on account of higher collections from direct taxes. The higher revenue was channelled to support operating expenditure, which was driven mainly by emoluments, and grants and transfers to statutory bodies. Development expenditure was higher on an annual basis during the quarter, with a sizeable proportion disbursed to the economic sector. As a result, the Federal Government recorded a fiscal deficit of 2.3% of GDP during the quarter. The deficit continued to be financed by domestic borrowings. As at end-June 2014, total outstanding debt of the Federal Government amounted to RM568.9 billion or 53% of the estimated 2014 GDP.

Net International Reserves (as at end period)

Reserves Retained import cover (RHS) Reserves/ST ext debt (RHS)

Month/Times USD billion


0

2

4

6

8

10

12

14

70 80 90

100 110 120 130 140 150 160

J 2012

F M A M J J A S O N D J 2013


F M A M J J

pada 31 Julai '14:USD131.8 bilion

9.0 bulan

1.2 kali

0

2

4

6

8

10

12

14

70 80 90

100 110 120 130 140 150 160

J 2012



F M A M J J

as at 31 July ‘14:USD131.8 billion

9.0 months

1.2 times


48

MONETARY AND FINANCIAL DEVELOPMENTS

Interest rates remained stable

The Overnight Policy Rate (OPR) was maintained at 3.00% during the second quarter of 2014. At this level of the OPR, monetary conditions remained supportive of economic activity.

Reflecting the unchanged OPR, the average overnight interbank rate was stable during the quarter, moving within a range of 2.95% to 3.00% between 1 April and 30 June 2014. Interbank rates for tenures of 1 month and less were also broadly stable. The 3-month interbank rate, however, continued to rise throughout the quarter due to the preference of interbank lenders for shorter-term lending, in line with the shift in their deposits toward shorter maturities. This was further reinforced by expectations for an OPR increase between May and July which resulted in further upward movement in the interbank rates.

Similarly, rates on interest rate swaps and the 3-month Kuala Lumpur Interbank Offered Rate (KLIBOR) futures increased during the period amid market expectations for an OPR increase in the second half.

Retail deposit rates were stable during the period. The average quoted fixed deposit (FD) rates of commercial banks were relatively unchanged. As at end-June 2014, the average quoted FD rates of commercial banks for the tenures 1 to 12 months ranged between 2.91% to 3.15%, respectively.

Lending rates to the economy were also broadly stable throughout the quarter. The average base lending rate (BLR) of commercial banks remained unchanged at 6.53%. The weighted average lending rate (ALR) on outstanding loans was stable (end-June 2014: 5.37%; end-March 2014: 5.39%).

Lending rates on car loans, however, reflected the enhancement of banks’ risk management practices. Nevertheless, overall lending rates continued to be close to levels prior to the Global Financial Crisis.


2013 2014

S2 S1 S2

Pada akhir tempoh (%)

Kadar Dasar Semalaman (OPR)Kadar antara bank

Semalaman1 bulan

3.00

3.003.08

3.00

3.003.06

3.00

3.003.54

Kadar berian pinjaman asas (BLR)Bank perdagangan 6.53 6.53 6.53

Kadar pinjaman purata (ALR) berwajaranBank perdagangan 5.43 5.39 5.37

Kadar deposit tetapBank perdagangan

1 bulan12 bulan

2.913.15

2.913.15

2.913.15

Sumber: Bank Negara Malaysia

Kadar Faedah

2013 2014

2Q 1Q 2Q

At end-period (%)

Overnight Policy Rate (OPR)Interbank rates

Overnight1-month

3.00

3.003.08

3.00

3.003.06

3.00

3.003.54

Base lending rate (BLR)Commercial banks 6.53 6.53 6.53

Weighted average lending rateCommercial banks 5.43 5.39 5.37

Fixed deposit ratesCommercial banks

1-month12-month

2.913.15

2.913.15

2.913.15

Interest Rates

Interest Rate Swap: Rates

1 year 3 years 5 years 10 years

Source: Bloomberg

%

2.7

3.0

3.3

3.6

3.9

4.2

4.5

2012 2Q 3Q 4Q

2013 20142Q1Q 2Q1Q3Q 4Q

3.503.733.97

4.33

Daily Weighted Average Overnight Interbank Rate


%

1.80

2.20

2.60

3.00

3.40

3.80

Dec

‘10

Mar

‘11

Jun

‘11

Sep

‘11

Dec

‘11

Mar

‘12

Jun

‘12

Sep

‘12

Dec

‘12

Mar

‘13

Jun

‘13

Sep

‘13

Dec

‘13

Mar

‘14

Jun

‘14

Ceiling rate of the corridor for the OPR

Floor rate of the corridor for the OPR

3.00%

3.50%13 Aug: 3.25%

3 Month KLIBOR Futures

%

Quarterly volume Open Interest3M KLIBOR Futures Yield for 3rd Contract Month (RHS)

No. of contracts (thousands)

Source: Bursa Malaysia

2Q 3Q 4Q 2012

1Q 2Q 3Q 4Q 2013

1Q 2Q 2014

2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0

0

5

10

15

20

25

30

35

49


Amid firm growth prospects and with inflation expected to remain above its long-run average, the Monetary Policy Committee (MPC) decided to raise the OPR by 25 basis points to 3.25% on 10 July 2014. The adjustment in the degree of monetary accommodation was also aimed at mitigating the risk of broader economic and financial imbalances that could undermine the longer term growth prospects of the Malaysian economy.

The wholesale and retail lending and deposit rates were revised to levels that are consistent with the current OPR level. The average BLR of commercial banks increased to 6.78%, with most commercial banks revising their respective BLRs by 25 basis points. Depositors were also compensated by a higher rate of return on their savings following the increase in the OPR. The average quoted fixed deposit (FD) rates rose between 15 to 17 basis points to a higher range of 3.07% to 3.30% as at end-July. Notwithstanding the rise in the OPR, monetary conditions continue to remain supportive of economic activity.

M3 continued to expand

The monetary aggregates continued to expand in the second quarter. M1, or narrow money, increased by RM2.2 billion during the quarter. On an annual basis, M1 expanded by 10.2% as at end-June (end-March 2014: 11.4%). M3, or broad money, increased by RM19.8 billion on a quarter-on-quarter basis to record an annual growth rate of 5.6% as at end-June (end-March: 5.9%).

The increase in M3 during the quarter was driven by the continued expansion in credit extended


Weighted ALRBLR

Lending Rates of Commercial Banks (At end-period)

%

6.53

5.37

5.20

5.50

5.80

6.10

6.40

6.70

Jun

‘12

Sep

‘12

Dec

‘12

Mar

‘13

Jun

‘13

Sep

‘13

Dec

‘13

Mar

‘14

Jun

‘14

Monetary Aggregates

Annual growth (%)


3

5

7

9

11

13

15

Dec

‘12

Jan

‘13

Feb

‘13

Mar

‘13

Apr

‘13

May

‘13

Jun

‘13

Jul ‘

13

Aug

‘13

Sep

‘13

Oct

‘13

Nov

‘13

Dec

‘13

Jan

‘14

Feb

‘14

Mar

‘14

Apr

‘14

May

‘14

Jun

‘14

M1: 10.2

M3: 5.6

Outstanding Liquidity Placed with Bank Negara Malaysia (At end-period, RM billion)RM billion

Repo

OthersBank Negara Malaysia Debt Securities SRRMoney Market Borrowings (excluding repo)


100 140 180 220 260 300 340 380 420 460 500 540

Dec

‘11

Mar

‘12

Jun

‘12

Sep

‘12

Dec

‘12

Mar

‘13

Jun

‘13

Sep

‘13

Dec

‘13

Mar

‘14

Jun

‘14

`

Change during the period

2013 2014

2Q 1H 1Q 2Q 1H

RM billion

M3Net claims on GovtClaims on private sector

LoansSecurities

Net foreign assets1

BNMBanking System

Other infl uences

23.32.3

30.230.8-0.6-6.8-2.1-4.7-2.4

67.710.854.252.41.90.84.2

-3.41.9

21.77.0

24.724.9-0.2-4.7

-18.013.3-5.3

19.83.1

29.226.42.9

-6.63.1

-9.7-6.0

41.510.153.951.32.6

-11.4-14.9

3.6-11.2

Determinants of Broad Money, M3

1 Pre-revaluation Note: Numbers may not add up due to rounding


Perubahan pada tempoh

2013 2014

S2 ST1 S1 S2 ST1

RM bilion

M3Tuntutan bersih terhadap

KerajaanTuntutan terhadap

sektor swastaPinjamanSekuriti

Aset asing bersih1

BNMSistem Perbankan

Pengaruh lain

23.3

2.3

30.230.8-0.6-6.8-2.1-4.7-2.4

67.7

10.8

54.252.41.90.84.2

-3.41.9

21.7

7.0

24.724.9-0.2-4.7

-18.013.3-5.3

19.8

3.1

29.226.42.9

-6.63.1

-9.7-6.0

41.5

10.1

53.951.32.6

-11.4-14.9

3.6-11.2

Penentu Wang Secara Luas, M3

1 Sebelum penilaian semula Nota: Angka-angka tidak semestinya terjumlah disebabkan oleh penggenapan Sumber: Bank Negara Malaysia

to the private sector by the banking system and higher net claims on the Government. These expansionary factors, however, were partially offset by the decline in net foreign assets.


50

In the banking system, ample liquidity conditions prevailed at both the institutional and system-wide levels. The level of surplus liquidity placed with BNM was relatively stable during the quarter.

Private sector financing activity was sustained in the second quarter

In the second quarter, total gross financing raised by the private sector through the banking system and the capital market amounted to RM281.0 billion (1Q 2014: RM282.2 billion). On a net basis, outstanding banking system loans and PDS expanded at an annual growth rate of 9.1% as at end-June (end-March 2014: 9.6%).

Net lending to businesses by the banking system expanded by a lower amount of RM8.0

billion during the quarter (1Q 2014: RM11.0 billion). The annual growth of outstanding business loans also moderated to 7.2% during the quarter (end-March 2014: 8.8%) due to the stronger growth in loan repayments relative to disbursements. Nevertheless, the level of loans disbursed to businesses remained healthy during the quarter, with loans disbursed to SMEs being RM1.4 billion more than the previous quarter. Demand for new financing by businesses also increased with higher loan applications recorded across major sectors.

Net financing to the household sector expanded by RM18.6 billion during the quarter (1Q 2014: RM15.9 billion). On an annual basis, outstanding household loans grew by 11.5% as at end-June (end-March 2014: 11.6%).

During the period (RM billion) Annual growth (%)

2013 2014 2013 2014

2Q 1H 1Q 2Q 1H 2Q 1H 1Q 2Q 1H

Gross total fi nancingLoans disbursed*Gross PDS**Equity

Net total fi nancing (A)+(B)Banking system

Loans outstanding (A)Holding of PDS

PDS outstanding (B)

Memorandum itemGross PDS***

247.4231.5

11.14.8

32.631.232.8-1.6-0.3

11.8

490.5451.633.15.8

66.056.056.2-0.29.9

34.4

282.2258.419.64.2

32.322.121.01.1

11.3

20.5

281.0258.117.75.2

28.927.825.91.93.0

18.5

563.2516.537.39.4

61.249.946.93.1

14.3

39.1

-8.6-3.1

-43.5-60.0

9.29.79.1

18.19.4

-42.6

-10.1-4.1

-46.1-56.5

9.29.79.1

18.19.4

-47.3

16.117.4-11.1

320.7

9.69.7

10.23.47.7

-9.1

13.611.559.87.2

9.19.29.37.48.5

56.5

14.814.412.661.2

9.19.29.37.48.5

13.4

Financing of the Private Sector through the Banking System and Capital Market

* Banking system loans include loans sold to Cagamas** Excluding Cagamas and foreign issuances*** Including Cagamas and foreign issuancesNote: Numbers may not add up due to rounding


Pada tempoh (RM bilion) Pertumbuhan tahunan (%)

2013 2014 2013 2014

S2 ST1 S1 S2 ST1 S2 ST1 S1 S2 ST1

Jumlah pembiayaan kasarPengeluaran pinjaman*PDS kasar**Ekuiti

Jumlah pembiayaan bersih (A)+(B)Sistem perbankan

Pinjaman terkumpul (A)Pemegangan PDS

PDS terkumpul (B)

MemorandumPDS kasar***

247.4231.5

11.14.8

32.631.232.8-1.6-0.3

11.8

490.5451.633.15.8

66.056.056.2-0.29.9

34.4

282.2258.419.64.2

32.322.121.01.1

11.3

20.5

281.0258.117.75.2

28.927.825.91.93.0

18.5

563.2516.537.39.4

61.249.946.93.1

14.3

39.1

-8.6-3.1

-43.5-60.0

9.29.79.1

18.19.4

-42.6

-10.1-4.1

-46.1-56.5

9.29.79.1

18.19.4

-47.3

16.117.4-11.1

320.7

9.69.7

10.23.47.7

-9.1

13.611.559.87.2

9.19.29.37.48.5

56.5

14.814.412.661.2

9.19.29.37.48.5

13.4

Pembiayaan Sektor Swasta Melalui Sistem Perbankan dan Pasaran Modal

* Pinjaman sistem perbankan termasuk pinjaman yang dijual kepada Cagamas** Tidak termasuk Cagamas dan terbitan asing*** Termasuk Cagamas dan terbitan asingNota: Angka-angka tidak terjumlah disebabkan oleh penggenapan



Bank Lending to SMEs

Loan Applications Loan Approvals Loan Disbursements

RM billion

44.4 37.6 36.1

43.6 48.9 52.4 51.0

43.4 46.6

26.4 18.4

16.3 15.9 19.3 18.1 18.1

15.1 16.2

57.1 54.6 55.9 55.5 56.6 56.2 58.3 55.6 57.0

0 5

10 15 20 25 30 35 40 45 50 55 60 65

2Q ‘12 3Q ‘12 4Q ‘12 1Q ‘13 2Q ‘13 3Q ‘13 4Q ‘13 1Q ‘14 2Q ‘14

Gross Private Sector Financing through theBanking System and Capital Market

Loans Disbursed Gross PDS Issued (excl. Cagamas) Equity


RM billion

270.6 269.3 259.8 243.1 247.4 255.9

299.9 282.2 281.0

70

120

170

220

270

320

2Q ‘12 3Q ‘12 4Q ‘12 1Q ‘13 2Q ‘13 3Q ‘13 4Q ‘13 1Q ‘14 2Q ‘14

51


Loans disbursed Loans out-standing

During the period (RM billion)Share of total Share of total

(%)

2Q 13 1Q 13 1Q 14 2Q 14 1H 14

Business enterprisesLarge corporations SMEs*

Selected sectorsAgriculture, hunting, forestry and fi shingMining and quarryingManufacturingConstructionReal estateElectricity, gas and water supplyWholesale, retail, restaurants and hotelsTransport, storage and communicationFinance, insurance and business services

HouseholdsPurchase of residential propertiesConsumption creditOf which: Credit cards Purchase of passenger carsOthers

158.5101.956.6

8.22.3

48.013.910.93.5

43.93.8

17.1

73.018.441.5

23.310.113.1

307.7195.6112.1

17.04.5

95.127.519.75.4

87.87.1

31.5

143.935.282.8

46.021.025.8

184.0128.455.6

8.73.5

54.416.812.92.6

53.75.7

18.9

74.419.740.3

24.29.0

14.4

180.9123.857.0

7.23.9

52.814.511.72.1

52.87.4

21.2

77.320.042.1

24.59.6

15.2

364.9252.2112.6

15.97.4

107.231.324.74.7

106.513.140.1

151.739.782.4

48.718.629.6

70.648.821.8

3.11.4

20.76.14.80.9

20.62.57.8

29.47.7

15.9

9.43.65.7

42.826.216.6

2.50.77.74.16.01.17.42.46.5

57.227.118.2

2.710.911.9

Total 231.5 451.6 258.4 258.1 516.5 100.0 100.0

*Include loans to individual businesses.Note: Numbers do not add up due to rounding


Pengeluaran pinjaman Pinjamanterkumpul

Pada tempoh (RM bilion)Bahagian

drpd. jumlahBahagian

drpd. jumlah

(%)

S2 13 S1 13 S1 14 S2 14 ST 1 14

Perusahaan perniagaanSyarikat besar PKS*

Sektor terpilih Pertanian, perburuan, perhutanan dan perikanan Perlombongan dan kuari Perkilangan Pembinaan Harta tanah Bekalan elektrik, gas dan air Perdagangan borong dan runcit, restoran dan hotel Pengangkutan, penyimpanan dan komunikasi Kewangan, insurans dan perkhidmatan perniagaan

Isi rumahPembelian harta kediamanKredit penggunaan Antaranya:

Kad kreditPembelian kereta penumpang

Lain-lain

158.5101.956.6

8.22.3

48.013.910.93.5

43.93.8

17.1

73.018.441.5

23.310.113.1

307.7195.6112.1

17.04.5

95.127.519.75.4

87.87.1

31.5

143.935.282.8

46.021.025.8

184.0128.455.6

8.73.5

54.416.812.92.6

53.75.7

18.9

74.419.740.3

24.29.0

14.4

180.9123.857.0

7.23.9

52.814.511.72.1

52.87.4

21.2

77.320.042.1

24.59.6

15.2

364.9252.2112.6

15.97.4

107.231.324.74.7

106.513.140.1

151.739.782.4

48.718.629.6

70.648.821.8

3.11.4

20.76.14.80.9

20.62.57.8

29.47.7

15.9

9.43.65.7

42.826.216.6

2.50.77.74.16.01.17.42.46.5

57.227.118.2

2.710.911.9

Jumlah 231.5 451.6 258.4 258.1 516.5 100.0 100.0

Pinjaman Mengikut Sektor

* Termasuk pinjaman kepada perniagaan individuNota: Angka-angka tidak semestinya terjumlah disebabkan oleh penggenapan


Loans by Sector

Loan IndicatorsDuring the period (RM billion) Annual growth (%)

2013 2014 2013 2014

2Q 1H 1Q 2Q 1H 2Q 1H 1Q 2Q 1H

TotalLoan applicationsLoan approvalsLoan disbursementsLoan repaymentsChange in loans outstanding*

Of which:Business enterprises**

Loan applicationsLoan approvalsLoan disbursementsLoan repaymentsChange in loans outstanding*

SMEs**Loan applicationsLoan approvalsLoan disbursementsLoan repaymentsChange in loans outstanding*

Large corporations Loan applicationsLoan approvalsLoan disbursementsLoan repaymentsChange in loans outstanding*

HouseholdsLoan applicationsLoan approvalsLoan disbursementsLoan repaymentsChange in loans outstanding*

208.7103.9231.5207.632.8

91.642.9

158.5144.913.7

48.919.356.651.47.8

42.723.6

101.993.55.9

117.161.073.062.717.2

395.9191.3451.6415.256.2

176.277.4

307.7289.220.8

92.635.2

112.1103.013.7

83.642.2

195.6186.2

7.0

219.7113.9143.9126.133.3

185.691.1

258.4245.921.0

86.234.8

184.0179.5

11.0

43.415.155.652.77.1

42.819.7

128.4126.8

3.9

99.456.374.466.315.9

207.598.1

258.1239.725.9

91.235.1

180.9175.8

8.0

46.616.257.053.95.8

44.618.9

123.8122.0

2.2

116.363.077.363.918.6

393.1189.2516.5485.646.9

177.569.9

364.9355.418.9

90.031.3

112.6106.512.9

87.438.6

252.2248.8

6.1

215.7119.3151.7130.234.6

-5.8-6.8-3.11.19.1

-20.5-25.9-9.4-2.88.1

10.2-27.0-0.812.813.1

-39.7-24.9-13.6-9.74.6

10.113.814.111.611.7

-5.3-5.0-4.11.99.1

-20.1-25.0-7.5-1.28.1

-6.1-17.8

5.713.513.1

-31.4-30.1-13.6-7.94.6

11.216.03.9

10.011.7

-0.94.2

17.418.410.2

1.90.7

23.324.48.8

-0.5-5.30.22.1

13.0

4.45.9

37.036.95.7

-3.16.55.14.7

11.6

-0.6-5.611.515.59.3

-0.4-18.114.121.37.2

-4.8-15.8

0.74.7

11.4

4.6-20.021.630.54.1

-0.73.25.81.9

11.5

-0.7-1.114.416.99.3

0.7-9.718.622.97.2

-2.8-11.1

0.43.4

11.4

4.5-8.629.033.74.1

-1.84.75.53.3

11.5

* The annual growth is for end-period.** Include loans to individual businesses.Note: Numbers do not add up due to rounding


Penunjuk PinjamanPada tempoh (RM bilion) Pertumbuhan tahunan (%)

2013 2014 2013 2014

S2 ST1 S1 S2 ST1 S2 ST1 S1 S2 ST1

JumlahPermohonan pinjamanKelulusan pinjamanPengeluaran pinjamanBayaran balik pinjamanPerubahan dalam pinjaman terkumpul*

Antaranya:Perusahaan perniagaan**

Permohonan pinjamanKelulusan pinjamanPengeluaran pinjamanBayaran balik pinjamanPerubahan dalam pinjaman terkumpul*

PKS**Permohonan pinjamanKelulusan pinjamanPengeluaran pinjamanBayaran balik pinjamanPerubahan dalam pinjaman terkumpul*

Syarikat besarPermohonan pinjamanKelulusan pinjamanPengeluaran pinjamanBayaran balik pinjamanPerubahan dalam pinjaman terkumpul*

Isi rumahPermohonan pinjamanKelulusan pinjamanPengeluaran pinjamanBayaran balik pinjamanPerubahan dalam pinjaman terkumpul*

208.7103.9231.5207.632.8

91.642.9

158.5144.913.7

48.919.356.651.47.8

42.723.6

101.993.55.9

117.161.073.062.717.2

395.9191.3451.6415.256.2

176.277.4

307.7289.220.8

92.635.2

112.1103.013.7

83.642.2

195.6186.2

7.0

219.7113.9143.9126.133.3

185.691.1

258.4245.921.0

86.234.8

184.0179.5

11.0

43.415.155.652.77.1

42.819.7

128.4126.8

3.9

99.456.374.466.315.9

207.598.1

258.1239.725.9

91.235.1

180.9175.8

8.0

46.616.257.053.95.8

44.618.9

123.8122.0

2.2

116.363.077.363.918.6

393.1189.2516.5485.646.9

177.569.9

364.9355.418.9

90.031.3

112.6106.512.9

87.438.6

252.2248.8

6.1

215.7119.3151.7130.234.6

-5.8-6.8-3.11.19.1

-20.5-25.9-9.4-2.88.1

10.2-27.0-0.812.813.1

-39.7-24.9-13.6-9.74.6

10.113.814.111.611.7

-5.3-5.0-4.11.99.1

-20.1-25.0-7.5-1.28.1

-6.1-17.8

5.713.513.1

-31.4-30.1-13.6-7.94.6

11.216.03.9

10.011.7

-0.94.2

17.418.410.2

1.90.7

23.324.48.8

-0.5-5.30.22.1

13.0

4.45.9

37.036.95.7

-3.16.55.14.7

11.6

-0.6-5.611.515.59.3

-0.4-18.114.121.37.2

-4.8-15.8

0.74.7

11.4

4.6-20.021.630.54.1

-0.73.25.81.9

11.5

-0.7-1.114.416.99.3

0.7-9.718.622.97.2

-2.8-11.1

0.43.4

11.4

4.5-8.629.033.74.1

-1.84.75.53.3

11.5

* Pertumbuhan tahunan adalah untuk akhir tempoh.** Termasuk pinjaman kepada perniagaan individu.Nota: Angka-angka tidak semestinya terjumlah disebabkan oleh penggenapan



52

Lower net funds raised in the capital market

Net funds raised in the capital market were lower at RM17.2 billion in the second quarter (1Q 2014: RM39.4 billion). The decline was due mainly to lower issuances of government and private debt securities and concurrently, higher redemptions in both sectors.

In the private sector, new issuances of private debt securities (PDS) amounted to RM18.5 billion (1Q 2014: RM20.5 billion). Funds raised were contributed mainly by issuances in the construction and finance, insurance, real estate and business services sectors, for working capital and general corporate purposes. Meanwhile, equity issuances during the quarter amounted to RM5.2 billion (1Q 2014: RM4.2 billion). After adjusting for redemptions, net funds raised by the private sector amounted to RM8.7 billion (1Q 2014: RM15.4 billion).

In the public sector, gross funds raised moderated to RM24.5 billion (1Q 2014: RM27.5 billion). Funds were raised through new issuances of a 5-year Malaysian Government Security (MGS) and a 3-year Government Investment Issue (GII), as well as the re-opening of a 3-year, 10-year and 20-year MGS and 7-year and 14-year GII. The Government also issued the Government Housing Sukuk of RM2.6 billion during the quarter.

2013 2014

2Q 1H 1Q 2Q 1H

RM billion

By Public SectorGovernment securities, net

Malaysian GovernmentSecurities

Government InvestmentIssues

Less: RedemptionsSavings Bonds, net Government Housing

Sukuk, net

10.2 12.6

12.6

12.0 12.0 (2.4)

-

18.2 18.9

26.1

22.0 29.2 (2.4)

1.7

24.0 20.0

14.5

9.0 3.5

-

4.0

8.5 5.9

11.9

10.0 16.0

-

2.6

32.5 25.9

26.4

19.1 19.5

-

6.6

By Private SectorSharesDebt securities, net

Private Debt SecuritiesLess: Redemptions

3.7 4.8

(1.1) 11.8 12.9

12.4 5.8 6.6

34.4 27.9

15.4 4.2

11.2 20.5 9.4

8.7 5.2 3.5

18.5 15.0

24.0 9.4

14.7 39.1 24.4

Total 13.9 30.6 39.4 17.2 56.6

Note: Numbers may not add up to total due to rounding

Source: Bank Negara Malaysia and Bursa Malaysia

2013 2014

S2 ST1 S1 S2 ST1

RM bilion

Oleh Sektor AwamSekuriti Kerajaan, bersih

Sekuriti KerajaanMalaysia

Terbitan PelaburanKerajaan

Tolak: PenebusanBon Simpanan, bersih

Sukuk Perumahan Kerajaan, bersih

10.2 12.6

12.6

12.0 12.0 (2.4)

-

18.2 18.9

26.1

22.0 29.2 (2.4)

1.7

24.0 20.0

14.5

9.0 3.5

-

4.0

8.5 5.9

11.9

10.0 16.0

-

2.6

32.5 25.9

26.4

19.1 19.5

-

6.6

Oleh Sektor SwastaSahamSekuriti hutang, bersih

Sekuriti Hutang SwastaTolak: Penebusan

3.7 4.8

(1.1) 11.8 12.9

12.4 5.8 6.6

34.4 27.9

15.4 4.2

11.2 20.5 9.4

8.7 5.2 3.5

18.5 15.0

24.0 9.4

14.7 39.1 24.4

Jumlah 13.9 30.6 39.4 17.2 56.6

Dana Bersih yang Diperoleh dalam Pasaran Modal

Nota: Angka-angka tidak semestinya terjumlah disebabkan oleh penggenapan

Sumber: Bank Negara Malaysia dan Bursa Malaysia

Net Funds Raised in the Capital Market

Private Debt Securities Issued by Purpose (% of total)

New activities Refinancing Mergers & Acquisitions

Others1

1Q 2014 2Q 20141 Includes issuance for the purpose of working capital and general business activities, as well as issuance by non-residents and Cagamas


%

0 10 20 30 40 50 60 70 80

90

13.95.0

0.3

80.8

13.7 12.3

0.0

73.9

53


Bond yields increased in the short- to medium-end

MGS yields in the short- to medium-end of the yield curve increased, driven mainly by market expectations for an OPR increase. This increase in the MGS yields was, however, partially mitigated by the sustained demand for MGS by non-residents arising from the positive sentiments generated by the release of better-than-expected domestic economic data. Yields on 3-year and 5-year MGS recorded an increase of 11 and 8 basis points respectively, while the 10-year MGS recorded a decline of 7 basis points. Higher rated corporate bond yields also moved in tandem with the increase in MGS yields. The yields on the 5-year AAA and AA-rated corporate bonds recorded an increase of 7 and 4 basis points respectively.

Secondary trading in the bond market increased

Total trading in the secondary market increased to RM152 billion during the quarter (1Q 2014: RM137 billion) supported mainly by the GII segment with a higher liquidity ratio of 0.25. Liquidity ratios in the MGS and PDS segments remained relatively unchanged at 0.26 and 0.06 respectively.

Liquidity Ratio: Value of Bond Traded / Outstanding

2Q 20141Q 2014


0.262

0.247

0.057

0.256

0.176

0.058

0.00 0.05 0.10 0.15 0.20 0.25 0.30

MGS

GII

PDS


5-year MGS and 5-year PDS Yields

%

2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0

Sep

‘09

Dec

‘09

Mar

‘10

Jun

‘10

Sep

‘10

Dec

‘10

Mar

‘11

Jun

‘11

Sep

‘11

Dec

‘11

Mar

‘12

Jun

‘12

Sep

‘12

Dec

‘12

Mar

‘13

Jun

‘13

Sep

‘13

Dec

‘13

Mar

‘14

Jun

‘14

AAA 4.206 AA 4.580

A 6.911

MGS 3.743


Trend in MGS Yields

Years to maturity

%

2.8

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

1 2 3 4 5 6 7 8 9 10

Mar '14

Jun '14

Dec '13

3-year:11.3 bps

5-year: 8.0 bps

10-year:-6.6 bps


54

Positive performance of the FBM KLCI

In the second quarter, the FBM KLCI increased by 33.5 points to close at 1,882.7 points (end-March 2014: 1,849.2 points). The index was supported mainly by renewed interest from foreign investors following better-than-expected domestic and global economic data releases. Nevertheless, the increases were partially offset by concerns over adverse geopolitical developments. Overall, market capitalisation increased to RM1.77 trillion as at end-June Bursa Malaysia: Selected Market Indicators

2013 2014

As at end

June Mar June

Price IndicesCompositeFBMEMAS1

ACE Market2

Market capitalisation (RM billion)No. of companies listed

1,773.5

12,304.9 4,684.5

1,598.8 910

1,849.2

12,797.6 6,661.3

1,719.1 907

1,882.7 13,049.8 6,668.8

1,770.4 906

During the period

2Q 1Q 2Q

Average daily turnoverVolume (million units)Value (RM million)

1,714.8 2,464.4

2,046.4 2,158.8

1,876.3 2,192.4

1 FBMEMAS stands for FTSE Bursa Malaysia EMAS Index2 From 3 August 2009, MESDAQ market was replaced with ACE Market Source: Bursa Malaysia

Bursa Malaysia: Penunjuk Pasaran Terpilih2013 2014

Pada akhir

Jun Mac Jun

Indeks hargaKompositFBMEMAS1

Pasaran ACE2

Permodalan pasaran (RM bilion)Bilangan syarikat yang disenaraikan

1,773.5

12,304.9 4,684.5

1,598.8

910

1,849.2

12,797.6 6,661.3

1,719.1

907

1,882.7 13,049.8 6,668.8

1,770.4

906

Pada tempoh

S2 S1 S2

Urus niaga harian purataJumlah (juta unit)Nilai (RM juta)

1,714.8 2,464.4

2,046.4 2,158.8

1,876.3 2,192.4

1 FBMEMAS mewakili pasaran Indeks FTSE Bursa Malaysia EMAS2 Mulai 3 Ogos 2009, pasaran MESDAQ digantikan dengan Pasaran ACE Sumber: Bursa Malaysia

Bursa Malaysia: Market Turnover2013 2014

2Q 1H 1Q 2Q 1H

Billionunits

RMbillion

Billionunits

RMbillion

Billionunits

RMbillion

Billionunits

RMbillion

Billionunits

RMbillion

TurnoverOf which:

Main BoardOf which

Consumer ProductsIndustrial ProductsConstructionTrading/ServicesFinancePropertiesPlantationsInfrastructure

ACE Market1

108.0

91.4

4.5 19.6 5.0

28.7 5.4

11.5 1.2 1.6

13.7

150.3

147.3

6.3 13.3 9.3

55.0 34.6 13.8 4.9 5.1 2.4

170.1

140.3

7.6 28.3 7.4

45.3 8.9

16.7 2.4 2.9

24.2

249.8

245.2

11.6 20.3 13.2 97.3 56.5 19.5 9.7 9.3 3.7

120.7

91.3

8.4 18.9 4.0

33.9 3.4

10.5 1.7 1.5

26.8

127.4

119.7

7.1 13.1 5.9

51.9 18.8 7.8 5.4 4.7 7.0

118.2

91.4

6.2 16.2 5.1

36.4 3.9

11.9 1.5 1.5

22.9

138.1

131.8

6.0 12.5 7.1

54.8 27.0 9.7 5.5 4.4 5.5

238.9

182.7

14.6 35.0 9.1

70.3 7.3

22.4 3.2 3.0

49.8

265.5

251.5

13.2 25.6 13.0

106.7 45.8 17.5 10.9 9.1

12.6

1From 3 August 2009, MESDAQ market was replaced with ACE Market

Source: Bursa Malaysia

Bursa Malaysia: Urus Niaga Pasaran2013 2014

S2 ST1 S1 S2 ST1

Bilionunit

RMbilion

Bilionunit

RMbilion

Bilionunit

RMbilion

Bilionunit

RMbilion

Bilionunit

RMbilion

Urus niagaAntaranya:

Papan UtamaAntaranya

Produk PenggunaProduk IndustriPembinaanDagangan/KhidmatKewanganHarta BendaPerladanganInfrastruktur

Pasaran ACE1

108.0

91.4

4.5 19.6 5.0

28.7 5.4

11.5 1.2 1.6

13.7

150.3

147.3

6.3 13.3 9.3

55.0 34.6 13.8 4.9 5.1 2.4

170.1

140.3

7.6 28.3 7.4

45.3 8.9

16.7 2.4 2.9

24.2

249.8

245.2

11.6 20.3 13.2 97.3 56.5 19.5 9.7 9.3 3.7

120.7

91.3

8.4 18.9 4.0

33.9 3.4

10.5 1.7 1.5

26.8

127.4

119.7

7.1 13.1 5.9

51.9 18.8 7.8 5.4 4.7 7.0

118.2

91.4

6.2 16.2 5.1

36.4 3.9

11.9 1.5 1.5

22.9

138.1

131.8

6.0 12.5 7.1

54.8 27.0 9.7 5.5 4.4 5.5

238.9

182.7

14.6 35.0 9.1

70.3 7.3

22.4 3.2 3.0

49.8

265.5

251.5

13.2 25.6 13.0

106.7 45.8 17.5 10.9 9.1

12.6

1 Mulai 3 Ogos 2009, pasaran MESDAQ digantikan dengan Pasaran ACE

Sumber: Bursa Malaysia

2014 (end-March 2014: RM1.72 trillion) while the daily average turnover declined to 1.88 billion units (1Q 2014: 2.05 billion units).

On 13 August 2014, the KLCI ended lower at 1,858.0 points (since end-June 2014: -1.31%), with market capitalisation of RM1.78 trillion (since end-June 2014: 0.55%).

2Q 2014 1Q 2014

Source: Bloomberg and Bank Negara Malaysia calculations

Performance of Selected Global and Regional Equity Markets in 2014 (% growth QoQ)

0.9

-3.9

-1.3

-1.0 0.7

-2.2

-9.0 11.6

1.3

9.1 6.0

-0.4

0.7

0.8

1.8

2.1

2.2 2.3

2.3 4.7

6.5 8.0

-10 -5 0 5 10 15

AustraliaPR China

KoreaMalaysia

SingaporeUK

JapanIndonesia

USPhilippines

Thailand

(%)

55


Ringgit strength driven by both external and domestic factors

The ringgit and most other regional currencies appreciated against the US dollar as sound regional growth prospects and the continued highly accommodative monetary policy in the US sustained investor interest in regional financial markets. Positive sentiments following the release of better-than-expected domestic economic data, particularly the strong first quarter economic growth and a stronger pace of export growth, also supported the ringgit. Overall, the ringgit appreciated by 1.8% against the US dollar. The ringgit also appreciated against the euro (2.6%) and Japanese yen (0.3%), but depreciated against the pound sterling (-0.6%) and Australian dollar (-0.2%). Ringgit performance against regional currencies was mixed.

Between 1 July and 13 August 2014, the ringgit appreciated against the US dollar by 0.6%. The ringgit also appreciated against the euro (2.7%), Australian dollar (2.1%), pound sterling (2.0%) and Japanese yen (1.6%). The ringgit’s performance against regional currencies was mixed.

Higher foreign exchange derivatives activity

The volume of foreign exchange swaps, forwards and options was higher in the second quarter at RM293.8 billion, an increase of 19.4% from the previous quarter. The expansion was driven mainly by foreign exchange swaps, which contributed for 86% of the total foreign exchange derivatives transactions. The higher volumes also reflected a more active management of US dollar liquidity and the exposures by banks arising from increased portfolio inflows during the quarter. There was also a rise in US dollar swap against third currency activities (other than the ringgit) such as offshore Chinese renmimbi (CNH) and the

Summary of Ringgit Performance against Selected Currencies Percent Change (1 April - 30 June 2014)


(+)ve indicates ringgitappreciation

-3.4 -1.1

-0.6 -0.2

-0.2 0.3

0.9 1.5

1.8 1.9

2.6

7.0

-4 -2 0 2 4 6 8

KRW PHP GBP TWD AUD JPY SGD CNY USD THB EUR IDR

(%)

Ringgit Performance against Regional Currencies


Index (End March 2014=100)

indicates ringgitappreciation

94 96 98

100 102 104 106 108 110

31 M

ar

9 A

pr

18 A

pr

29 A

pr

9 M

ay

21 M

ay

30 M

ay

10 J

un

19 J

un

30 J

un

IDR

PHP SGD

THB

KRW

CNY

Ringgit Performance against Major Currencies


Index (End March 2014=100)

96

98

100

102

104

31 M

ar

9 A

pr

18 A

pr

29 A

pr

9 M

ay

21 M

ay

30 M

ay

10 J

un

19 J

un

30 J

un

USD

JPY

GBP

EUR

indicates ringgitappreciation


56

RM per foreign currencyAs at end % change since*

21 Jul 05 2Q 13 1Q 14 2Q 14 21 Jul 05 2Q 13 1Q 14

US dollarEuroPound sterlingAustralian dollar100 Japanese yenSingapore dollar100 Thai baht100 Philippine peso100 Indonesian rupiah100 Korean won100 New Taiwan dollarChinese renminbi

3.80004.62126.62702.88233.37452.25709.06816.81310.03860.366511.8900.4591

3.17854.15354.85372.94143.21602.513010.1977.34910.03200.277410.6020.5172

3.26854.49345.43543.01733.17702.592710.0777.27950.02880.306510.7270.5251

3.21054.38065.46723.02353.16902.57039.89377.35890.02690.317310.7510.5172

18.45.5

21.2-4.76.5

-12.2-8.3-7.443.615.510.6-11.2

-1.0-5.2

-11.2-2.71.5

-2.23.1

-0.119.0

-12.6-1.40.0

1.82.6

-0.6-0.20.30.91.9

-1.17.0

-3.4-0.21.5

* (+) indicates appreciation of ringgit against respective currency and (-) indicates depreciation.


RM bagi satu unit mata wang asingPada akhir tempoh % perubahan sejak*

21 Jul 05 S2 13 S1 14 S2 14 21 Jul 05 S2 13 S1 14

Dolar ASEuroPaun sterlingDolar Australia100 yen JepunDolar Singapura100 baht Thai100 peso Filipina100 rupiah Indonesia100 won Korea100 dolar Taiwan BaharuRenminbi China

3.80004.62126.62702.88233.37452.25709.06816.81310.03860.366511.8900.4591

3.17854.15354.85372.94143.21602.513010.1977.34910.03200.277410.6020.5172

3.26854.49345.43543.01733.17702.592710.0777.27950.02880.306510.7270.5251

3.21054.38065.46723.02353.16902.57039.89377.35890.02690.317310.7510.5172

18.45.5

21.2-4.76.5

-12.2-8.3-7.443.615.510.6-11.2

-1.0-5.2

-11.2-2.71.5

-2.23.1

-0.119.0

-12.6-1.40.0

1.82.6

-0.6-0.20.30.91.9

-1.17.0

-3.4-0.21.5

Prestasi Ringgit berbanding dengan Mata Wang Terpilih

* (+) menunjukkan penambahan nilai ringgit berbanding dengan mata wang berkenaan dan (-) menunjukkan penyusutan nilai.


Performance of Ringgit against Selected Currencies

Australian dollar (AUD), as banks increased their positions in these relatively higher yielding currencies to improve returns.

Meanwhile, the cost of borrowing US dollar through the cross-currency swap markets

narrowed, with the 5-year USD/MYR cross-currency swaps declining from 78 basis points in March to 70 basis points in June. This effectively implied a lower borrowing cost of LIBOR + 70 basis points (1Q 2014: LIBOR + 78 basis points) as US dollar liquidity in the domestic market improved.

57


MANAGING RISKS TO FINANCIAL STABILITY

Domestic financial stability continued to be preserved

The Malaysian financial system exhibited continued resilience in the second quarter amid improved conditions in the global and domestic financial markets. Financial intermediation remained well-supported by sound financial institutions, orderly financial market conditions and sustained confidence in the financial system.

Credit risk remained manageable on sustained debt servicing capacity of borrowers

Credit risk in the banking system remained stable throughout the quarter, supported by sustained debt servicing capacity of borrowers in general. The level of net impaired loans stabilised at 1.3% of net loans (1Q 2014: 1.3%) while the level of loans-in-arrears of between one and three months declined marginally to 2.7% of total loans (1Q 2014: 2.8%). The size of credit risk exposures of the insurance industry, largely attributed to holdings of private debt securities and reinsurance placements, remained stable at 3.5% of capital base (1Q 2014: 3.3%).

Aggregate household borrowings via banks and major non-bank financial institutions grew by 2.5% during the quarter to amount to RM897.8 billion (1Q 2014: 2.3%; RM875.5 billion). This was attributed mainly to the sustained growth in financing for the purchase of properties and motor vehicles, and credit card balances. On a year-on-year basis, the expansion in aggregate household debt continued at a more moderate pace of 10.3% (1Q 2014: 11%; 4Q 2013: 11.5%). Slower house price increases, as reflected in the annual growth of the Malaysian House Price Index (preliminary 1Q 2014: 8%; 4Q 2013: 9.6%), likely indicates the early effects of intensified measures by the Government to discourage speculative purchases. This will contribute towards sustaining a lower overall debt burden for households given that borrowings for the purchase of residential

property remain the largest component of household debt at about 45%.

The quality of household debt continued to be sound. Impaired household loans and loans-in-arrears of between one and three months were sustained at 1.2% and 2.0% of total borrowings from the banking sector, respectively, amid stable employment conditions and sustained wage growth. At the aggregate level, household financial assets remained healthy at 2.2 times of household debt. Following the implementation of macroprudential and microprudential measures, the quality of new household debt has continued to improve with lower debt service ratios reported by banks for new borrowings, particularly among borrowers in the lower income groups. The Bank continues to maintain a high degree of vigilance over the lending practices of financial institutions, including the personal financing segment.

Banking System: Loan Quality


Net impaired loans Net impaired loans ratio (RHS) Gross impaired loans ratio for businesses (RHS) Gross impaired loans ratio for households (RHS)Gross impaired loans ratio for SMEs (RHS)

% RM billion

2011 2012 2013 2014

0

2

4

6

8

0

5

10

15

20

25

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

Credit risk from exposures to the business sector remained manageable. The debt servicing capacity of businesses improved, supported by sustained revenues and operating efficiency. The aggregate interest coverage ratio of businesses remained sound at 7.2 times in the first quarter (4Q 2013: 9 times), while leverage as measured by the ratio of debt-to-equity was unchanged at 39.7%. Current assets were stable at 1.8


58

times of current liabilities (4Q 2013: 1.8 times). Domestic borrowings (loans, private debt securities and sukuk) by businesses expanded at a slower pace of 1.0% during the quarter (1Q 2014: 1.4%). On a year-on-year basis, the expansion was also slower at 5.9% (1Q 2014: 7.2%), driven mainly by property-related sectors. Similarly, external borrowings of the business sector grew at a more moderate pace in the first quarter (1.6%; 4Q 2013: 2%). On a year-on-year basis, the expansion also continued at a more moderate pace of 20.4% (4Q 2013: 22.6%). The bulk of external borrowings comprised financing of investments abroad by Malaysian corporations across diverse geographical locations and in the more capital-intensive economic sectors such as the oil and gas, telecommunications and power sectors. Intra-group borrowings for operations in Malaysia to improve funding efficiency also contributed to higher external borrowings. Based on a survey, the majority of these external borrowings are hedged against foreign exchange risks through proceeds of overseas operations and derivative instruments. Based on the Bank’s sensitivity analysis, major corporations with large external borrowings and high import content are assessed to be able to withstand more volatile currency movements, thus limiting potential credit losses to the banking system. The quality of banking system credit exposures to businesses remained healthy during the quarter, with impaired loans and loans-in-arrears of between one and three months remaining unchanged at 2.7% and 0.5% of total business loans, respectively. The risk of delinquency, as measured by the expected default frequency, remained low and improved further to 0.15% (1Q 2014: 0.18%) following the sustained financial performance of businesses.

Volatile short-term portfolio flows were well-intermediated without any disruptive effects on the domestic financial markets and intermediation activities. Average volatility for 10-year MGS yields and the FBM KLCI eased further to 6.6% and 6.4% respectively (1Q 2014: 10.6% and 7.1%

respectively) amid improving global economic conditions and expectations of continued highly accommodative monetary policy by the Federal Reserve. Strong corporate earnings recorded in the previous quarter further boosted market sentiments, while demand for equities and bonds by domestic local institutions has remained firm. The bid-ask spreads of MGS and FBM KLCI averaged at 0.1% and 0.4% of the mid-price respectively (1Q 2014: 0.1% and 0.4% respectively). The turnover ratio for MGS and FBM KLCI remained stable at 8.5% and 2.0% respectively (1Q 2014: 9.1% and 1.8% respectively). Rates on interest rate swaps and the 3-month KLIBOR futures remained stable, albeit elevated, reflecting continued market expectations for an OPR increase in the second half of 2014.

Market risk exposures continued to be well-managed by financial institutions

Overall risk-taking behaviour of financial institutions remained broadly unchanged, with continued active risk management and hedging strategies observed among banks. Banks’ exposure to interest rate risk in their trading books accounted for 1.7% of their total capital (1Q 2014: 1.7%). Exposures to equity risk increased slightly to account for 1.3% of total capital (1Q 2014: 0.9%), while the foreign exchange (FX) net open position of the banking system edged higher to 5.9% of total capital during the quarter (1Q 2014: 6.2%). Market

Banking System: Basel III Capitalisation

% RM billion

Common equity tier 1 capital ratio

Excess capital (RHS) Tier 1 capital ratio

Total capital ratio


2013 2014

0

20

40

60

80

100

8

10

12

14

16

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

14.8

13.0

12.2

59


risk exposures of the insurance industry increased slightly to account for 12.5% (1Q 2014: 12.4%) of total capital available, driven by higher investment in equity of RM43.8 billion (1Q 2014: RM42.2 billion).

The financial sector continued to remain sound and resilient

Capitalisation of the banking system remained high, with the common equity tier 1 (CET1) capital ratio, tier 1 capital ratio and total capital ratio well above the minimum regulatory levels, at 12.2%, 13% and 14.8%, respectively. The total capital buffer of the banking system stood at more than RM80 billion. More than 80% of banks’ total capital consists of high quality capital, as indicated by the strong CET1 level in the form of paid-up capital, retained earnings and reserves. Similarly, the capital adequacy ratio of the insurance sector remained strong at 249.7% (1Q 2014: 249.7%), with an excess capital buffer of RM25.7 billion.

The banking system registered higher pre-tax profit totalling RM8.1 billion in the second quarter (1Q 2014: RM8 billion), with returns on asset and equity at 1.5% and 15.8% respectively (1Q 2014: 1.5% and 16% respectively). In the insurance sector, the excess income over outgo of life insurers and family takaful operators increased to RM4.6 billion (1Q 2014: RM3.2 billion) on account of higher profit on sale of assets, net investment income and net premiums during the quarter. General insurers and takaful operators also recorded higher operating profit of RM708.9 million (1Q 2014: RM664.1 million) due to higher earned premium income and net investment income.

Banking System: Profitability

2011 2012 2013 2014

% %

Return on assets Return on equity (RHS)


1.5%

15.8%

0

5

10

15

20

25

0

1

2

3

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

RM8.1 bil

Banking System: Pre-tax Profits

2011 2012 2013 2014

RM billion


0

2

4

6

8

10

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

Sistem Perbankan: Untung Sebelum Cukai

2011 2012 2013 2014

RM bilion


0

2

4

6

8

10

S1 S2 S3 S4 S1 S2 S3 S4 S1 S2 S3 S4 S1 S2

RM8.1 bil

Insurance Sector: Capitalisation

2011 2012 2013 2014

% RM billion

Total capital available Total capital required Capital adequacy ratio (RHS)


210

220

230

240

250

260

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 0

10

20

30

40

50


60

2013 2014

2Q 1H 1Q 2Q 1H

RM million

Life insurance & family takafulExcess income over outgo

General insurance & general takafulOperating profi tClaims ratio (%)

4,620.6

628.457.9

8,387.3

1,275.257.9

3,212.9

664.154.9

4,606.3

708.956.9

7,819.2

1,373.056.9

Annual Change (%)

Life insurance & family takafulExcess income over outgo

General insurance & general takafulOperating profi tClaims ratio (percentage points)

-3.3

13.1-2.2

-30.2

5.0-2.2

-14.7

2.7-5.8

-0.3

12.8-1.0

-6.8

7.7-1.0

Insurance and Takaful Sectors: Indicators


2013 2014

S2 ST1 S1 S2 ST1

RM juta

Insurans hayat & takaful keluargaLebihan pendapatan berbanding perbelanjaan

Insurans am & takaful amKeuntungan kendalianNisbah tuntutan (%)

4,620.60

628.457.9

8,387.3

1,275.257.9

3,212.9

664.154.9

4,606.3

708.956.9

7,819.2

1,373.056.9


Insurans hayat & takaful keluargaLebihan pendapatan berbanding perbelanjaan

Insurans am & takaful amKeuntungan kendalianNisbah tuntutan (mata peratusan)

-3.3

13.1-2.2

-30.2

5.0-2.2

-14.7

2.7-5.8

-0.3

12.8-1.0

-6.8

7.7-1.0


Sektor Insurans dan Takaful: Penunjuk

Banking System: Liquidity Buffer to Total Deposit Ratio%

Liquidity buffer <1-week maturity Liquidity buffer <1-month maturity Source: Bank Negara Malaysia

20111Q 2Q 3Q 4Q

20121Q 2Q 3Q 4Q

20131Q 2Q 3Q 4Q

20141Q 2Q

5

10

15

20

25

14.6

14.2

Liquidity in the banking system remained ample with sufficient buffers to meet short-term liquidity needs over the 1-week and 1-month horizons (2Q 2014: 14.2% and 14.6% of total deposits; 1Q 2014: 14.2% each). In addition, net placements by banking institutions with Bank Negara Malaysia, which can be utilised to meet additional liquidity needs amounted to RM115 billion. Banks recorded a higher USD surplus of RM16.9 billion and RM9.4 billion in the less than 1-week and less than 1-month maturity buckets, respectively (1Q 2014: surplus of RM1.7 billion and RM7.9 billion, respectively).

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