- Malaysia’s overall current account advanced to RM10.0bil (or accounting for 3.6% of GDP) in 1Q15. That compares to RM5.7bil (or 2.0% of GDP) in 4Q14.

- The current account rose by RM4.3bil QoQ due to lower outflow in primary income account totalling RM8.5bil (4Q14: -RM13.2bil) and lower deficit in services account of RM3.8bil (4Q14: -RM5.5bil).

- During 1Q15, international trades slowed compared to 4Q14. We note that the overall contribution of net trades had moderated to RM27.5bil in 1Q15 vs. RM29.4bil in 1Q14.

- However, with the positive net trades, current account is likely to maintain a surplus in 2015. We envisage current account to register 3.8% of GDP (vs. 4.3% in 2014).

- As a recap, for the full year of 2014, the current account surplus widened to RM47.3bil (or 4.3% of GDP). That compares to RM35.5bil (or 3.5% of GDP) in 2013.

- In 2014, the wider surplus in current account was contributed by higher surplus in goods account of RM113.4bil in 2014 (2013: RM96.6bil).

- Meanwhile, overall balance of payment had registered an outflow of RM15.7bil in 1Q15 due to the outflow recorded in the financial account. In 4Q14, balance of payment had registered -RM11.5bil.

- The financial account recorded higher net outflow of RM29.7bil in 1Q15 (from -RM26.6bil in 4Q14). The drag in the account was mainly attributable to other investment which had registered outflow of RM20.6bil (4Q14: -RM4.0bil).

- Elsewhere, Foreign Direct Investment (FDI) in Malaysia improved slightly to RM9.9bil (4Q14: RM9.8bil).

- Aside from that, international reserves of BNM fell in 1Q15. It amounted to RM389.6bil as at end-March 2015 (or -RM15.7bil QoQ).

- Overall reserves level dwindled during 1Q15 owing to the highly volatile forex market and the currency support to ensure an orderly fluctuation of the Ringgit.

- By end-1Q15, Ringgit weakened to 3.70 per USD (or -5.9% YTD). However, the Ringgit has strengthened in the recent weeks to close at 3.56 last Friday.

Source: AmeSecurities Research - 18 May 2015