- Malaysia’s Consumer Price Index (CPI) registered a growth of 2.8% YoY in October, compared to 2.6% in September.

- During the month, core inflation grew by 2.7% YoY, compared to +2.3% YoY in September.

- Meanwhile, the transport index registered a growth of 5.3% YoY owing to the cut in petrol subsidy effective 2 October (vs. +0.5% in September).

- Meanwhile, the cost component of Food and Non-alcoholic Beverages tapered to 2.8% YoY (September: +3.2% YoY).

- On a YTD basis, inflation grew by 3.2% YoY as at end-October. The price increase as at YTD 2014 was mainly driven by the Food and Non-alcoholic Beverages (+3.5% YoY) and Transport (+4.9% YoY).

- No changes to our projections at this juncture. We expect headline inflation to register an average growth of 3.2% in 2014 and 4.2% in 2015.

- According to the Domestic Trade, Cooperatives and Consumerism Minister Datuk Hasan Malek on Friday, subsidies for RON95 petrol and diesel will be abolished effective 1 December.

- The retail prices for RON95 petrol and diesel will be fixed according to a managed float which will be similar to the mechanism dictating the petrol pump price of RON97.

- Hasan said there would be an announcement at the end of each month to set the following month's fuel prices.

- The RON97 petrol is already on the managed float system and is not subsidised by the government.

- The retail price of RON97 petrol has been reduced by 20 sen a litre, from RM2.75/litre to RM2.55/litre throughout the country Wednesday.

- For 2015, the government’s estimates are based on the assumption that the average crude oil price for Brent is USD100 per barrel. As of last Friday, Brent crude oil closed at USD80.36 per barrel.

- Based on the budget announcement in October, the provision for overall subsidies amounts to RM37.7bil (or -7.1% YoY) for 2015.

- Given the lower-than-expected global crude oil price, overall government expenditure for fuel subsidy will reduce. Similarly, lower global oil price results to lower government revenue.

Source: AmeSecurities