Below expectation – Consumer price index (CPI) in Nov’17 eased to +3.4% y-o-y (v.s Oct’17: +3.7%). The result was below our in-house expectation of +3.6% but within consensus of +3.4%. The lower-thanexpected result was induced by bigger drop in Transport index. However, on monthly basis, CPI recorded a +0.2% m-o-m growth as compared to -0.2% m-o-m growth in last month.

Falling Transport inflation – Transport component continued its downtrend, +10.8% y-o-y (v.s Oct’17: +12.1%). However, transport index in monthly basis increased +3.3% m-o-m (v.s Oct’17: -0.2%), lifted by rising retail fuel prices in November. Overall, retail fuel prices in Nov’17 increased by 10sen for RON95, 8sen for RON 97 and 12sen for Diesel.

Besides, other key components continued to moderate in this month: -

• Housing; Water; Electricity; Gas: +2.2% y-o-y (vs +2.4% in Oct’17)

• Health : +2.2% y-o-y (vs +2.4% in Oct’17)

• Communication : -0.5% y-o-y (vs -0.4% in Oct’17)

• Miscellaneous Goods & Services: +0.7% y-o-y (vs +1.2% in Oct’17)

Plunge in Food inflation – Food and Non-Alcoholic beverage component which accounts for 30.2% of CPI components plunged to +4.0% y-o-y growth in Nov’17 as compared to +4.0% in previous month. The growth in this component was dented by slower growth in sub-group components mainly Oils & Fats (+1.5% y-o-y, v.s Oct’17: +16.2%), and Vegetables (+3.2% y-o-y, v.s Oct’17: +5.0%).

Foresee 2017 inflation at 3.8% – Despite continuing downtrend in 4Q17’s CPI index, we expect that inflation rate for the whole year of 2017 to inch down slightly lower to +3.8% from 4.0% in 2017 following recovery in commodity prices and strengthening of MYR. Besides that, we also reckon that BNM will increase OPR by 25bpts in 2018 in view of strong economic growth and manageable inflation rate.

Source: JF Apex Securities Research - 21 Dec 2017