-  The international reserves at BNM inched up slightly during 1H of October on the back of inflow of foreign funds. Total reserves stood at USD136.6bil (or RM444.9bil) as at 14 October 2013. That compares to USD136.5bil (or RM444.6bil) at the end of September.

-  The reserves position remains at a healthy level and is sufficient to finance up to 9.7 months of retained imports and is 3.9 times the short-term external debt. The international reserves at BNM will continue to remain at a comfortable level owing to inflows of capital coupled with the surplus through trade.

-  Based on our estimate, balance of payment (BOP) for 3Q13 will probably register a surplus of RM11.76bil as compared to +RM1.52bil is 2Q13. In part, BOP for 3Q13 will be supported by the improvement in net trades during the quarter.

-  Elsewhere, regional central banks are collaborating to strengthen the economic and financial linkages. Bank Negara Malaysia and the Bank of Korea have announced the establishment of a bilateral local currency swap arrangement during the weekend.

-  The effective period of the arrangement is three years and could be extended by mutual agreement between the two central banks. The currency swap enables for the exchange of local currencies of up to KRW5tril (or MYR15bil).

-  Overall, we deem the currency swap deal to be beneficial on the following aspects:- 1) to guard against financial volatilities and currency swings; and 2) flexibility to adopt local currencies for bilateral trade settlements and investment activities.

-  The Ringgit has appreciated by 2.7% this month to close at 3.17 yesterday. It has traded within a range of 3.15 to 3.25 since the US Fed unexpectedly said it would maintain monetary stimulus during the monetary policy meeting last month.

-  In terms of international trades, we gather that South Korea is among Malaysia’s prominent trade counterpart. As of YTD August 2013, South Korea contributes 3.5% and 4.8% to Malaysia’s total exports and imports respectively. In 2012, the contributions of exports and imports from South Korea were 3.6% and 4.1% respectively.

-  Malaysia’s total trade with South Korea amounted to RM36.47bil as of YTD August 2013 (as compared to RM49.97bil for the full year of 2012). However, the YTD bilateral trade favoured South Korea. Malaysia’s overall net trades with South Korea had registered an outflow of RM4.49bil (2012: +RM629.2mil). 

Source: AmeSecurities