- Broad money in Malaysia grew at a moderated pace during the month of April. Money supply, M3, advanced by 8.2% YoY in April (March: +9.1% YoY). The annual expansion was mainly on account of credit extension to the private sector. Sequentially, the expansion in M3 by 0.6% was partially offset by net foreign outflows and lower net claims on the government (March: +0.8% MoM).

- Total loans outstanding at healthy level. Separately, total loans outstanding remains at a healthy pace of RM1.139tril or +10.5% YoY in April (March: +10.6% YoY). We continue to expect domestic -driven growth as forward-looking indicators for the banking sector signal expansion ahead.

- Ringgit showed mixed performance. Currency wise, the Ringgit had appreciated on a MoM basis against most major tradable currencies during the month of May. However, the Ringgit was weaker vis-à-vis CNY (-2.2% MoM); USD (-1.7%); EUR (-1.4%); and IDR (-1.0%).

- Prices paid by producers continue to trend down. The Producer Price Index (PPI) fell by 4.9% YoY in April after a 4.2% contraction in March. The fall in price levels during the month was driven by the decline in local production cost (-6.5% YoY) and imports (-1.2%).

- Cigarette prices rise by about 3%. Elsewhere, British American Tobacco Malaysia (BAT Malaysia) announced a price hike for all its cigarette brands by 30 sen per pack effective June 3. Looking at inflation for the year, we do not expect intensifying price pressure stemming from the price increase in cigarettes.

- No change to our inflation projection for 2013. For 2013, we are maintaining our full-year inflation projection at 2.5% premised on the following:- (1) prices have stayed subdued at 1.5% to date; (2) cost component of alcoholic beverages and tobacco only constitutes 2.2% of total CPI; and (3) we had expected cigarette prices to increase this year and it happened sooner than expected.

- Global demand and trade activities to advance on growth prospects ahead. Global growth is projected to increase during 2H13 owing to improvements in domestic and trade activities going forward. Policy actions in advanced economies have remained supportive of economic developments.

- Economic policies are supportive of growth within the Asian basin. As for the emerging markets, prudent yet supportive macro policies will support modest growth. However, export-driven economies will continue to struggle with weak external demand and domestic bottlenecks. Owing to weak external environment, recent monetary policy easing including interest rate reduction among Asian economies is supportive of domestic growth.

- Retain our GDP estimate for Malaysia. Our GDP projection for 2013 is retained at 5.3% as we assume a steady growth trajectory amidst private-driven economic initiatives via ETP. Going forward, the various domestic economic corridors such as ISKANDAR and SCORE will likely benefit from more development plans.

Source: AmeSecurities