economic update 160308 - outlook

8/19/2019 Economic Update 160308 - Outlook

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ECONOMIC UPDATE

Reserves at BNM remain steady at USD95.6bil in

February 20168 March 2016

Patricia Oh Swee Ling

[email protected]

603-2036 2240

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Summary

According to data released by BNM yesterday, the international reserves of Bank Negara Malaysia had amounted to USD95.6bil

(which is equivalent to RM410.5bil) as at 29 February 2016. The reserves position is sufficient to finance 8.3 months of retained

imports and is 1.2 times the short-term external debt. It had advanced by USD100mil (or +0.1% MoM) ─ which is also an increase of

RM402.7mil (or +0.1% MoM) in Ringgit terms. We gather that the Ringgit had appreciated in the recent months, as it advanced

further to close at 4.21 per USD (or +2.1% YTD) as at end-February 2016 vs. 4.29 as at end-December 2015.

Key Highlights

Reserves at BNM remained steady in February 2016. International reserves at BNM advanced by USD100mil (or +0.1%MoM) to USD95.6bil in February 2016. In Ringgit terms, reserves had improved by RM402.7mil (or +0.1% MoM) to RM410.5bil.

We gather that the Ringgit had appreciated in the recent months, as it advanced further to close at 4.21 per USD (or +2.1%

YTD) as at end-February 2016 vs. 4.29 as at end-December 2015

Asian currencies appreciated as at YTD 2016. Based on last Friday’s closing, JPY was the best performer among theregional currencies, registering a gain of 5.4% YTD to close at JPY 113.74 per USD. Ringgit had also advanced by 4.0% YTD

2016. Meanwhile, GBP, KRW and INR are worst performers this year, as these currencies had depreciated against the

Greenback in 2016.

Considerably gains for the Ringgit in 2016. Ringgit has outperformed many regional currencies during 1Q16, except forstronger appreciation of JPY and IDR against USD. Nonetheless, Ringgit has remained relatively undervalued compared to

other regional currencies considering the lacklustre Ringgit performance last year. Ringgit had depreciated by 23% compared

to the dollar in 2015, closing at RM4.29 per USD as at 31 December 2015. Given the 4.0% appreciation of the Ringgit as at

YTD 2016, still, the Ringgit remains 19% lower compared to end-2014.

Uncertainties for the US economy and further downward pressure on USD. Despite the increase in non-farm payrolls andunchanged unemployment rate of 4.9% during the month of February 2016, the initial jobless claims in the US had

unexpectedly increased by 6,000 to 278,000 in the week ended 26 February 2016. That said, inflation rate in the US continuedto trend higher in January 2016 with core PCE at +1.7% YoY while PCE advanced by 1.3%, which are within the Fed’s

projection currently. Note that the Fed expects full-year core PCE and PCE to register growth rates of between 1.5-1.7% and

1.2-1.7% in 2016, respectively.

Malaysia’s exports deteriorated in January 2016. Exports fell by 2.8% in January 2016 vs. +1.4% in December 2015, due tothe stronger-than-expected Ringgit, weak crude oil prices and slowdown in global demand. The global economy is poised to

grow at a moderate pace while indicators for major economies suggest ongoing weaknesses in terms of external demand for

Malaysia’s major trade counterparts. That said, Malaysia’s GDP growth probably tapered in 1Q15 on slower trade balance and

softer domestic growth.


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Economic Update 8 March 2016

AmInvestment Bank Bhd 2

CHART 1 : INTERNATIONAL RESERVES AT BNM

2.00

2.50

3.00

3.50

4.00

4.50

5.00

80,000

90,000

100,000

110,000

120,000

130,000

140,000

150,000

J a n-1 3

M a r -1 3

M a y -1 3

J u l -1 3

S e p-1 3

N o v -1 3

J a n-1 4

M a r -1 4

M a y -1 4

J u l -1 4

S e p-1 4

N o v -1 4

J a n-1 5

M a r -1 5

M a y -1 5

J u l -1 5

S e p-1 5

N o v -1 5

J a n-1 6

USD mil MYR/USD (RHS)

Sources: Bloomberg / AmInvestment Bank Bhd

CHART 2 : PERFORMANCE OF REGIONAL CURRENCIES AGAINST USD

YTD 2016 2015

-6.0 -4.0 -2.0 0.0 2.0 4.0 6.0

GBP

KRW

INR

CNY

HKD

PHP

EUR

THB

AUD

SGD

MYR

IDR

JPY

-25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0

MYR

AUD

EUR

IDR

THB

KRW

SGD

GBP

INR

PHP

CNY

JPY

HKD

Notes: Chart 2 depicts the performance of regional currencies against the greenback. Positive territory indicates appreciation of currencies against USD, while negative territory

suggests depreciation of currencies.

Sources: Bloomberg / AmInvestment Bank Bhd


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Economic Update 8 March 2016

AmInvestment Bank Bhd 3

Published by

AmInvestment Bank Bhd (23742-V) (A member of the AmBank Group)

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Printed byAmInvestment Bank Bhd (23742-V) (A member of the AmBank Group)

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The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this

report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a

solicitation to buy any securities. The directors and employees of Am Investment Bank Bhd may from time to time have a position in or with

the securities mentioned herein. Members of the AmBank Group and their affiliates may provide services to any company and affiliates of

such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are

reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not

represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise

from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subj ect to

change without notice.

For AmInvestment Bank Bhd

Benny Chew

SR VP Equity Research

economic update 160308 - outlook

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