-  Economic indicators point to a slowdown in private sector expenditure. Aggregate domestic demand (ADD) is expected to be restrained in 4Q13 as private consumption slowed down. ADD may have grown, albeit at a softer pace of 7.9% in 4Q13 (3Q13: +8.3%). ADD had been supportive of growth despite sluggish exports during the most part of 2013. Cumulatively, ADD grew by 8.0% during the first three quarters of 2013.

-  Growth in M3 has been on a downward trend since February 2012. By the end of 3Q13, broad money supply (M3) had softened to +7.4% from +15.9% in February 2012. In November, M3 had slowed to +6.7% YoY, the lowest growth rate since December 2010 (October: +7.9% YoY).

-  Seven straight months of loans growth below 10%. Total loans outstanding came in at +9.9% YoY in November, unchanged from October. Loans growth had also slowed from as high as 13.8% in September 2008.

-  Purchasing power deteriorates. Malaysian’s purchasing power had deteriorated as discretionary spending erodes, spurred by the depreciating Ringgit and increasing prices. Prices will continue to soar as the government plans to rationalise subsidies in 2014.

-  Upside potential for the Greenback. The Dollar index had advanced by 3.5% in 2013 to close at 1020.77 points. However, this is still 3.2% lower than last year’s high of 1054.48 points achieved on July 5, 2013. As such, the USD may appreciate more should the QE continues to unwind.

-  External demand improves in 4Q13. GDP growth will be supported by the boost in external demand although private consumption expenditure had softened in 4Q13. Net trades may have contributed more than 7.0% to overall GDP in 4Q13 when compared to 6.4% in 3Q13.

-  A pick-up in overseas shipments ahead of the year-end festive season. Latest available statistics for China and Japan showed that these countries’ imports from Malaysia have improved considerably during the final quarter of 2013.

-  Boost to exports during the month of November. Note that China’s and Japan’s imports from Malaysia grew by 14.2% and 31.8% YoY respectively in November. As of YTD October 2013, China and Japan constituted 13.0% and 11.2% of Malaysia’s exports respectively.

-  Malaysia’s exports to advance further in November. Driven by the improvements in the E&E segment, Malaysia’s overall exports could pose a growth of 10.0% in November (October: +9.6% YoY). The Department of Statistics will release the trade statistics for November on January 8, 2014.

Source: AmeSecurities