-  The overall current account in 2Q13 fell to the lowest level since 4Q97. The current account moderated further in 2Q13 to register a surplus of RM2.55bil (1Q13: +RM8.66bil). As a percentage of nominal GDP, it had accounted for merely 1.1% in 2Q13.

-  The lower surplus was mainly contributed by:-(1) goods account: a lower surplus of RM18.7bil(1Q13: RM24.7bil); (2) services account: a higher deficit of RM3.7bil (1Q13: -RM3.4bil); and (3) secondary income account: a higher net outflow of RM4.1bil (1Q13: -RM3.8 bil).

-  As compared to the preceding year, the current account balance as of YTD 2013 had registered a lower surplus of RM11.2bil (1H12: RM24.8bil) which was due to the decrease in the surplus of goods account to RM43.3bil (1H12: RM65.7bil). Current account accounted for 2.4% of GDP during 1H13 vs. 5.4% in 1H12 and 6.1% in 2012.

-  With that, overall balance of payment had registered a surplus of RM1.52bil in 2Q13 which brings the YTD balance to +RM5.56bil in 1H13. In the previous year, balance of payment had registered +RM5.47bil in 1H12 and +RM3.87bil in 2012.

-  According to Abdul Wahid Omar, minister in the Prime Minister’s Department in charge of economic planning, the surplus has narrowed on increased overseas investment and property buying, higher imports for infrastructure projects, lower palm oil and rubber export prices and the acquisition of new aircrafts by Malaysian Airline System Bhd.

-  Elsewhere, the capital account recorded a higher net outflow of RM8.0mil compared to RM6.0mil in 1Q13. This was mainly due to higher net payments on acquisitions of non-produced non-financial assets. In 1H13, the net outflow narrowed to RM14.0mil compared to RM187.0mil posted in the same period of 2012.

-  Meanwhile, the financial account recorded higher net inflows of RM5.2bilin 2Q13from RM1.0bilin 1Q13. This was due to reversal of other investment. In particular, the FDI in Malaysia recorded net inflows of RM9.1bil (1Q13: RM9.1bil). FDI inflows were primarily channelled into manufacturing, oil & gas and financial & insurance sectors. The top three sources of FDI were Japan, Bermuda and Singapore.

-  For 1H13,the financial account posted a net inflow of RM6.2bil (1H12: -RM3.7bil). On the other hand, FDI recorded a higher inflow of RM18.2bil as compared to RM15.9bil in the same period of 2012.

-  Going forward, current account will likely remain lack lustre for the rest of 2013 as we continue to expect weaknesses in the external environment to drag overall exports growth. However, the firm domestic fundamentals will be a catalyst for the inflows of foreign funds.

Source: AmeSecurities