Last week’s highlights

• Ministry of Finance Malaysia (MOF) had released its 56th LAKSANA report last week.

• Malaysia’s industrial production index (IPI) surged by 50.1% yoy in April

• Malaysia’s distributive trade recorded sales of RM111.1bn in April, registering a double-digit growth of 66.2% yoy.

• The FBM KLCI fell by 0.21% or 3.29 points for the week to settle at 1,575.16 points

• U.S. headline inflation rose by 5.0% yoy in May

• US trade deficit surged by 30.1% to USD68.9bn in April compared to the same month in the preceding year

• April’s number of job openings in the US reached a series high by a growth of 6.0% to 9.3 million

• China exports continued double-digit growth of 27.9% yoy in May to USD263.9bn

• Taiwan exports rose by 38.6% annually to almost USD37.41bn

• Taiwan headline inflation hit 8-year high in May 2021, rose 2.48%

• Central banks of EU, Canada and Poland kept the interest rates unchanged, while Russia hikes.

MALAYSIA ECONOMY

• According to the Ministry of Finance Malaysia (MOF) 56th LAKSANA report, under BNM-SMEs soft loan funds, a total of RM12.06bn was approved to 25,605 applicants. For the technical and digitalization initiatives, RM66.4m has been distributed to 13,866 applicants under the fund. A total of RM65.1bn had been approved to the 327 micro and SMEs under the PENJANA Tourism fund. For BSN micro-credit financing, a total of RM421.2m was disbursed to 12,667 loaners as at end of May. The disbursed amount of wage subsidy 2.0 schemes stood at and RM1.215bn, benefitting 74,075 employers and 645,522 workers.
• Malaysia’s industrial production index (IPI) surged by 50.1% yoy in April, after a 9.3% gain in March 2021. The expansion marked the fifth straight month of increase in industrial output, driven by solid output in all sub-indices. The manufacturing sector output rose by 68.0% yoy in April, up from a 12.7% expansion in March. The electricity sector output expanded by 22.9% in April 2021, after a growth of 10.3% in the prior month. The mining sector output grew positively by 14.3% yoy in April as compared to -1.9% declined in March. Mining output posted positive growth for the first time since February 2020.
• Malaysia’s distributive trade recorded sales of RM111.1bn in April, registering a double-digit growth of 66.2% yoy. This strong expansion was due to strong motor vehicle trade growth, which rose by 1,551.3% yoy or RM13.0bn during the month to RM13.8bn. Similarly, wholesale and retail trades surged by double-digit growth of 40.5% yoy and 56.4% yoy, respectively. The growth in distributive trade improved with less strict restriction during the month and further uplifted by the low base effect when the country experienced full lockdown in April 2020.
• The international reserves of Bank Negara Malaysia (BNM) amounted to USD110.9bn as of 31 May 2021. The reserves position is sufficient to finance 8.4 months of retained imports and is 1.1 times total short-term external debt.
• U.S. headline inflation rose by 5.0% yoy in May, an increase from 4.2% in the previous month. The increase marked for the third straight month above 2.0% level and the fastest pace since August 2008 of 5.4% yoy. Core consumer price index (CPI) — the underlying measure of inflation that excludes volatile items like food and energy — rose 3.8% in May, after a 3.0% rise in April and the fastest since 1992. On a month on-month basis, headline CPI increased by 0.6% in May on a seasonally adjusted basis after rising 0.8% in April. The food index increased 0.4% in May, while the energy index rose at a zero percent level. Core rose slower 0.7% in May than 0.9% increase in April.
• US export rose by 36.60% on an annual basis to USD205.0bn. Meanwhile, imports were USD273.9bn, expanded by 34.9% yoy. Trade deficit surged by 30.1% to USD68.9bn in April compared to the same month in the preceding year. On a month-on-month basis, April’s export grew by 1.1% mom, a lower than 7.5% increase in March. April’s imports declined by 1.4% compared to the previous month. The goods and services deficit narrowed 8.2% from USD75.0bn in March. The deficit with China decreased USD7.1bn to USD32.4bn in April. For the first four months of 2021, the trade deficit increased 50.5% or USD94.5bn compared to the same period in 2020. Exports which totaled USD789.4bn, increased by 5.6% while imports were USD1,071.1bn, rose by 14.6%.
• US wholesale inventories grew 0.8% mom in April to USD698.0bn, slightly lower than the increase in the revised figure of 1.2% in March 2021. April 2021 sales of merchant wholesalers, except manufacturers’ sales branches and offices also were up by 0.8% to USD570.8bn compared to the previous month. On a year-on-year basis, inventories rose 5.2%, while sales at wholesalers jumped 43.6% yoy (Mar’21: +18.6%).
• April’s number of job openings reached a series high by a growth of 6.0% to 9.3 million, the highest level since the series began in December 2000. Hires were little changed at 6.1 million at a growth rate of 4.2%. The total separations include quits, layoffs and discharges, and other separations – rose 4.0% to 5.8 million. Within separations, the quits rate reached a series high of 2.7% while the layoffs and discharges rate decreased to a series low of 1.0%. Despite jobs are plentiful, unemployed persons in the US believe to remain at home owing to trouble securing childcare, plentiful unemployment benefits and lingering fears over COVID-19.
• US consumer sentiment moved higher according to the preliminary polls of the University of Michigan Consumer Sentiment Index which rose to 86.4 in June compared to 82.9 in the previous month.
• In the first quarter of 2021, seasonally adjusted GDP decreased by 0.3% (4Q20: -0.6%; 3Q20: +12.6%) in the euro area and by 0.1% (4Q20: -0.4%; 3Q20: +11.7%) in the EU compared with the previous quarter. Compared with the same quarter of the previous year, seasonally adjusted 1Q21’s GDP fell by 1.3% (4Q20: -4.7%) in the euro area and by 1.2% (4Q20: -4.4%) in the EU.
• UK exports of goods dropped by 18.0% yoy to GBP28.1bn in April 2021. EU exports for April 2021 were GBP13.1bn, an increase of 38% or GBP3.6bn compared with April 2020. Imports fell by 31.7% yoy to GBP39.1bn. EU imports for April 2021 were GBP17.2bn, an increase of 33% yoy or GBP4.3 bn. The total trade deficit in April 2021 widened to GBP11.0bn. Compared with the previous month, export was down 19.7% and import up 31.7%. Trade deficit was GBP4.1bn higher than in March.
• UK index of production fell by 1.3% mom in April 2021 meaning it was 3.1% below its level in February 2020. The decline in production was driven by falls of 15.0% in mining and quarrying, 0.3% in manufacturing 0.9% in water supply and sewerage. These declines were offset partially by a rise in electricity and gas of 0.5% in April. On a year-on-year basis, industrial production surged by 27.5% in April, an increase from 3.6% growth in March 2021.
• China exports continued double-digit growth of 27.9% yoy in May to USD263.9bn, down from the 32.3% seen in the previous month. This expansion was the eleventh consecutive period of export growth. Imports grew by 51.1% in May from a year earlier to USD218.4bn, up from the 43.1% growth seen in April. Import marked the eighth consecutive period of import growth and the fastest since January 2011. China’s total trade surplus stood at USD45.53bn in May, compared to USD42.855bn in April. In May, China’s imports from the US rose by 40.53% to USD13.11bn, while exports rose by 20.6% to USD44.89bn. China’s trade surplus with the US stood at USD31.78bn last month. In the period January to May, China’s exports grew 40.2% yoy r to USD1.24trn, while imports rose 35.6% yoy to USD1.03trn. China’s trade surplus during the same period was USD203.45bn, an increase of 70.2% yoy.
• The consumer price index (CPI) rose 1.3% yoy in May compared to 0.9% in April, according to data from the National Bureau of Statistics (NBS). Underlying inflation rose higher by 0.9% in May, up from 0.7% in April. Food prices rose 0.3% in March, a sharp turnaround from a decline of 0.7% last month. Non-food prices rose 1.6% yoy, up from a growth of 1.3% from the previous month.
• China’s official producer price index (PPI) rose to 9.0% in May from a year earlier, compared with 6.8% in April. The producer inflation hit the highest in 13-year, as manufacturers passed the surging of raw materials to wholesalers.
• Japan’s economy shrank 3.9% yoy in 1Q21, a huge reversal compared to 11.7% growth in the previous quarter. The economy has shrunk less than the preliminary data reported last month at a negative 5.1%. On quarter-on-quarter terms, GDP contracted by 1.0%, upwardly revised from -1.3%.
• Japan producer price index (PPI) rose higher by 4.9% yoy in May, an increase from 3.6% recorded in April. Producer prices in Japan marked their three straight months of inflation and it was the biggest rise since September 2008. The increase was largely because of higher energy and commodity prices.
• Taiwan exports rose by 38.6% annually to almost USD37.41bn, a small decline from 38.7% in the previous month. The outperformance was marked an eleventh straight month of expansion and the third month of double-digit growth. Exporters shipped USD13.27bn in electronic components, which includes semiconductors. China and Hong Kong remained the largest buyers of Taiwan's goods, up 29.5% to USD15.69bn. May’s imports jumped 40.9% to record USD31.25bn while the trade surplus widened to US6.16bn.
• Taiwan headline inflation hit 8-year high in May 2021, rose 2.48% compared with the same month of 2020, due mainly to a spike in prices of food, clothing, fuel and plane tickets. CPI for transportation and communications sector rose 9.50% with fuel prices soaring 43.92% and air ticket prices jumping 34.60%. Core CPI, which excludes the price of fruit, vegetables and energy, climbed 1.58% in May from the same month of the preceding year. Meanwhile, May’s wholesale price index (WPI) surged 11.33% percent from a year earlier.
• Total merchandise trade between the Philippines and the rest of the world more than doubled in April to USD14.16bn from a year ago, with both exports and imports posting substantial growth. Total external trade jumped 107.5% yoy in April from USD6.83bn. Exports grew by 72.1% yoy, while imports jumped by 140.9% yoy.

Central bank meetings

• The Bank of Canada (BoC) held its target for the overnight rate at the effective lower bound of 0.25%, with the bank rate at 0.5% and the deposit rate at 0.25%. BoC is continued to leverage the quantitative easing (QE) program, at a target pace of CAD3bn per week. The central bank sees the global economic activity picking up mainly in major economies like the US and China. However, the growth remains uneven across regions as the resurgence of the virus seems to hamper the recovery in some emerging market economies. Canada headline inflation has risen to around the top of the 1-3 percent inflation-control range and likely remain near the 3% level through summer. The higher inflation was largely due to base-year effects and much stronger gasoline prices. Core measures of inflation have also risen, due primarily to temporary factors and base year effects. BoC remains dovish on considerable excess capacity in the Canadian economy, and that the recovery continues to require extraordinary monetary policy support. BoC reiterates to hold the policy interest rate until the 2% inflation target is sustainably achieved.

• European Central Bank (ECB) kept unchanged the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility at 0.00%, 0.25%, and -0.50% respectively. The central bank expects the key ECB interest rates to remain at their present or lower bound until it has seen the inflation sustainable close to, but below, 2% target. ECB will continue to conduct net asset purchases under the pandemic emergency purchase program (PEPP) with a total envelope of EUR1,850bn until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over. The bank also to continue supportive in preventing a tightening of financing conditions through various QE tools. Net purchases under the asset purchase program (APP) will continue at a monthly pace of EUR20bn. The bank suggests APP ending will be the major signal before the key ECB interest rates start to be raised. For now, APP will run as long as necessary to reinforce the accommodative impact of its policy rates.

• National Bank of Poland (NBP) decided to keep the reference rate at 0.10%. The Lombard rate will remain at 0.50%, the deposit rate at 0.00%, the rediscount rate at 0.11%, and the discount rate at 0.12%. NBP will continue to purchase government securities and government-guaranteed debt securities on the secondary market as part of the structural open market operations. Furthermore, NBP will also offer bill discount credit aimed at refinancing loans granted to enterprises by banks. From March to May 28, 2020, NBP has cut the reference rate three times by a total of 140 bps to the present 0.10%.

• The Central Bank of Russia has raised the reference rate by 50 basis points to 5.5%. This tightening measure was the third consecutive rise since March this year. The decision interest hikes came from the underlying inflation, which consistently showed an upward trend. Core Inflation rose to 6.04% in May, above April’s 5.47%, March’s 5.38%, and February at 5.04%. The headline inflation also remains above the 4% target level for five straight months and reached the highest level since October 2016 in May 2021 at 6.02%

Source: BIMB Securities Research - 14 Jun 2021