August distributive trade rose 9.8% y/y largely supported by 8.9% y/y and 13.4% y/y growth from wholesale trade and retail trade respectively. Compared to wholesale trade, the retails sales data has been growing at double digits since March 2017. We believe the retail sales’ ability to maintain its double-digit growth for six consecutive months is underpinned by the improving consumer confidence supported by exports, domestic demand and tourism.

We maintain our moderate U-shaped recovery in the business segment. Despite a strong 1HGDP growth averaging 5.7% largely driven by exports and supported by domestic demand, it appears that some businesses have yet to benefit. Part of the reason is that some businesses are suffering from the high costs of doing business, increased competition and manpower shortage. Thus a mixed viewed is still being reflected, with export-oriented industries enjoying a weaker ringgit, while retailers and trading companies are not feeling the strong growth.

• August distributive trade rose 9.8% y/y from 11.1% y/y in July, largely supported by 8.9% y/y and 13.4% y/y growth from wholesale trade and retail trade respectively. Compared to wholesale trade, the retails sales data has been growing at double digits since March 2017.

• We believe the retail sales’ ability to maintain its double-digit growth for six consecutive months is underpinned by the improving consumer confidence. The positive spillover from the strong exports performance, domestic activities supported by the government investments and steady inflow of tourism are likely to be the main contributors. Efforts to digitalize the economy will also benefit the retail sector.

• We maintain our moderate U-shaped recovery in the business segment. Despite a strong 1HGDP growth averaging 5.7% largely driven by exports and supported by domestic demand, it appears that some businesses have yet to benefit. Part of the reason is that some businesses are suffering from the high costs of doing business, increased competition and manpower shortage. Thus a mixed viewed is still being reflected, with export-oriented industries enjoying the weaker ringgit, while retailers and trading companies are not feeling the strong growth.

Source: AmInvest Research - 16 Oct 2017