- Weak sentiments in 3Q15 despite steady economic growth. Malaysian economy stays on a steady growth trajectory as GDP had advanced by 4.7% in 3Q15. Growth in 3Q15 was supported by investment spending and healthy net trades, but partly offset by slower growth in both private and government consumption. For full-year 2015, GDP forecast is 4.9%, with the YTD growth of 5.1% as at 3Q15. Despite that, sentiment indicators and leading indicators had posted ongoing contractions during 3Q15.

- Consumer and businesses remained pessimistic. Quarterly market survey by Malaysian Institute of Economic Research (MIER) showed that sentiment indicators for both consumers and businesses had deteriorated further in 3Q15. The consumer sentiment index (CSI) fell by 1.5 points QoQ to 70.2 points while business condition index dipped by 9.0 points QoQ to 86.4 points in 3Q15.

- Business performance is expected to soften. Statistical release by the Department of Statistics suggests that Malaysia’s business condition is expected to slow down in the next three to six months. Business Tendency Statistics showed the current business performance in Malaysia as well as expectation for the upcoming two quarters contracted by 0.8% in 4Q15, from +2.2% in 3Q15. Confidence indicator is an indicator that summarises the overall view on the short-term business situation in various sectors in Malaysia. The confidence indicator is computed as the average of the net balance for selected variables.

- Unemployment rate at 3.2% in September. Malaysia continued to register a full rate of employment since March 2009. Unemployment rate was unchanged at 3.2% in September. Also, the labour force participation rate remained steady at 67.9% (from 67.8% in August). Total number of persons employed grew by 15,800 MoM to 13.9mil while total unemployed grew at a slower pace of 7,000 MoM to 460,600 persons.

- Businesses are less likely to boost hiring. Elsewhere, businesses signal slower hiring in anticipation of a softer outlook ahead. A survey by the Department of Statistics showed that 15.9% of businesses predict an increase in employment while 11.9% predict a decrease in 4Q15. The magnitude of the positive net balance of the number of employees in 4Q15 is lower (+4.0%) than +10.3% registered in 3Q15. In 3Q15, 17.4% of businesses indicated an increase in employment and 18.9% reported a decrease.

- Leading index contracted for three consecutive months in September 2015. The survey by the Department of Statistics showed that the leading index (LI) fell for three straight months to 118.5 points (or -0.3% YoY) in September. The annual change of the LI remained negative but it showed an improvement as compared to the previous month (August: 117.0 points). The MoM increase was underpinned by Number of Housing Units Approved (0.8%), Real Imports of Semi Conductors (0.4%), Real Money Supply, M1 and Bursa Malaysia Industrial Index, which registered 0.2%, respectively.

- Both the coincident and lagging indicators posted healthier growth rates. On a positive note, the coincident and lagging indicators remained healthy in September, registering growth rates of 1.3% YoY and 2.7%, respectively. On a monthly basis, the coincident index grew by 0.7% owing to the increase in Volume Index of Retail Trade (0.5%), Industrial Production Index (0.3%) and Total Employment in Manufacturing sector (0.2%).

- Producer prices contracted albeit at a slower pace of 2.6% YoY in October. Particularly, local production cost remains low as overall prices fell by 4.8% in October, narrower contraction compared to -7.0% in the preceding month. The highest drop in local prices was recorded by Mining index (-31.4%), followed by Electricity & gas (-4.4%) and Manufacturing (-2.0%). Meanwhile, the import price index for October 2015 increased by 1.8% (vs. +1.1% in September).

Source: AmeSecurities Research - 1 Dec 2015