- Globally, Malaysia continues to rank among the top in terms of strong growth economy. In 1Q15, GDP registered a growth of 5.6% YoY, driven by the robust domestic demand (4Q14: +5.7%).

- Domestic demand grew at a stronger pace in 1Q15 driven by public spending, private consumption expenditure, and investment expenditure. Aggregate domestic demand grew by 7.7% in 1Q15, contributing 93.5% to total GDP (4Q14: +6.4%).

- Private consumption accelerated by 8.8% (4Q14: +7.6%). Total investment had advanced by a healthy 7.9% YoY from 4.3% in 4Q14.

- The expansion in investment spending was spearheaded by the private sector, which contributed 68.5% of total investment (or +11.7% YoY).

- Trade balance had registered a surplus of RM21.0bil in 1Q15, broadly unchanged from RM21.5bil in 4Q14. However, net exports fell by 11.3% YoY (or RM2.7bil YoY). In terms of contribution, net exports had accounted for 8.0% of real GDP (4Q14: 8.3%).

- On the supply side, growth was mainly stimulated by the advancement in Services (+6.4% YoY), Mining & Quarrying (+9.6%), and Construction (+9.7% YoY).

- Going forward, domestic demand is expected to soften as retail spending probably slowed while weak global demand is likely to be a drag on exports.

- Meanwhile, household spending on transport had reduced in the past months as transport cost stayed in check since March.

- Note that retail prices for RON95 petrol, RON97 and diesel have been the same since March 2015. Based on May’s prices, RON 95 petrol is priced at RM1.95 a litre (or -13.7% YTD), RON 97 at RM2.25 a litre (or -8.5%) and diesel at RM1.95 a litre (or -12.6%)

- Based on the latest available data for 2013 on household spending, transport is noted to be the third largest composition of household spending, accounting for 14% of total expenditure.

- Aside from that, we gather that the recent statistical release by BNM showed improvement in total deposits held by the financial system, signalling high levels of savings.

- However, leading indicators for the banking sector suggest that the household segment remained soft. Total loans applications fell 4.0% YoY in March 2015, albeit at a slower rate compared to -17.1% YoY in February 2015.

Source: AmeSecurities Research - 18 May 2015