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2009 Real Gdp


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Government revises its 2009 real GDP growth forecast. The Prime
Minister (PM) announced yesterday that the official real GDP growth
forecast for this year is now between -4% and -5% from +1% to -1%
announced by Bank Negara Malaysia (BNM) in Mar 09. This is due to
the impact of the global recession on external demand which also
weakened domestic demand, especially private investment (1Q09: -
26% YoY), including FDI (1Q09: -50% YoY). However, apart from
mentioning a 25% drop in exports, no detailed breakdown of the
revised forecast was provided.

Published in: Economy & Finance, Business
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2009 Real Gdp

  1. 1. Equity Research PP11072/03/2010 (023549) Economics 29 May 2009 2009 Real GDP Official growth forecast revised Government revises its 2009 real GDP growth forecast. The Prime Suhaimi Ilias Minister (PM) announced yesterday that the official real GDP growth forecast for this year is now between -4% and -5% from +1% to -1% (603) 2297 8682 announced by Bank Negara Malaysia (BNM) in Mar 09. This is due to the impact of the global recession on external demand which also Ramesh Lankanathan weakened domestic demand, especially private investment (1Q09: - 26% YoY), including FDI (1Q09: -50% YoY). However, apart from (603) 2297 8685 mentioning a 25% drop in exports, no detailed breakdown of the revised forecast was provided. Malaysia: Annual Real GDP Growth % chg 2008 2009E 2009E 2009E 2010E 2009E 2010E ACTUAL OFFICIAL MAYBANK INVESTMENT BANK Revised Previous Revised Previous Real GDP 4.6 (4.0) - (5.0) 1.0 - (1.0) (3.8) 4.2 (1.3) 3.0 Manufacturing 1.3 NA (8.0) (12.5) 4.8 (10.0) 3.0 Services 7.2 NA 4.5 1.3 5.0 3.5 5.0 Agriculture 4.0 NA (2.0) (3.5) 3.0 0.5 1.3 Mining (0.8) NA (0.4) (4.0) 2.0 (1.0) 1.5 Construction 2.1 NA 3.0 1.1 3.0 1.1 2.3 Domestic Demand 6.8 NA 2.9 (0.5) 6.3 1.7 5.6 Private Consumption 8.5 NA 3.5 1.0 3.0 2.0 3.8 Public Consumption 10.9 NA 7.3 7.7 10.0 8.2 10.0 Gross Fixed Capital Formation 0.8 NA (1.0) (8.6) 7.9 (3.5) 7.0 Exports of Goods & Services 1.3 NA (16.6) (15.0) 9.0 (11.9) 5.9 Imports of Goods & Services 1.9 NA (14.9) (19.8) 7.8 (13.0) 6.1 Source: Dept. of Statistics, BNM, Maybank IB, PM’s Press Statement Quarterly GDP declining YoY until 3Q09 before a rebound in 4Q09. PM added that Malaysia’s economy will contract further in 2Q09 and 3Q09 after the 6.2% decline recorded in 1Q09 real GDP, to be followed by a possible expansion in 4Q09. The guidance is in line with our projected quarterly real GDP growth of -5.9% YoY in 2Q09, -4.8% YoY in 3Q09 and +1.5% in 4Q09 that will result in a 3.8% full-year contraction in the economy. Consistent with latest trends in leading economic indicators. Global and local leading economic indicators showed that the downturns which started in 2H08 and deepened in 1H09 appear to be bottoming and turning around in 3Q09.
  2. 2. 2009 Real GDP Malaysia: Quarterly Real GDP Growth (% YoY) 10 8 7.2 7.4 6.5 6.6 5.4 5.6 6 4.8 4 2 1.5 0.1 0 2Q09E 3Q09E 4Q09E 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 (2) (4) (6) (4.8) (6.2) (5.9) (8) Source: BNM, Maybank-IB Global: Leading Economic Indicators 20 15 10 5 0 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jul-97 Jul-00 Jul-03 Jul-06 Jul-09 Oct-96 Apr-98 Oct-99 Apr-01 Oct-02 Apr-04 Oct-05 Apr-07 Oct-08 (5) (10) BRIC East Asia ex Japan and China OECD - Total (15) Source: Bloomberg Malaysia: Leading Economic Indicators & Real GDP 25 20 20 16 15 12 10 8 5 4 0 0 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jul-93 Jul-96 Jul-99 Jul-02 Jul-05 Jul-08 Oct-92 Apr-94 Oct-95 Apr-97 Oct-98 Apr-00 Oct-01 Apr-03 Oct-04 Apr-06 Oct-07 Apr-09 (5) (4) (10) (8) (15) (12) Leading Economic Indicators (% 6-mth chg, LHS) Quarterly Real GDP (% YoY, RHS) Source: Bloomberg, Dept of Statistics 29 May 2009 Page 2 of 5
  3. 3. 2009 Real GDP Time to “crack the whip” on the fiscal stimulus, plus providing more “consistent” data on the implementation status. So far, based on the information in the official website on the economic stimulus packages, “on-the-ground” implementation of the two packages appears to be very slow. Of the RM7b in the first package (Nov ’08), RM6.37b or 91% has been distributed to the Ministries, Agencies and GLCs as of 12 May 2009, but only RM0.79b or 11% was actually spent. As for the second package (Mar ‘09), RM14.408b of the RM15b earmarked for Government spending in 2009-2010 has been disbursed but none has been spent yet. However, PM said that a total of RM5.4b involving 42,000 projects under the two packages have been implemented and awarded – RM3.4b (39,316 projects under the first package and RM2.2b (2,745) under the second package. Meanwhile, the Director General of EPU, Tan Sri Sulaiman Mahboub mentioned that the Government has already spent RM3.9b under the first package and RM3.7b under the second package. The Government targets to award all projects under the first package by the end of the month. On the Ninth Malaysia Plan (9MP, 2006-2010), only RM124.458b or 55.4% of the RM230 gross development expenditure allocated under the Plan has been spent up to 1Q 2009. Malaysia: Implementation Status of the Economic Stimulus Packages (RMb) 18 16 15.0 14.4 14 12 10 8 7.0 6.4 6 4 2 0.8 0.0 0 Govt Spending Allocation Disbursed to Actually Spent Ministries, Agencies, GLCs 1st Package (Nov 08) 2nd Package (Mar 09) Source: Malaysia: Implementation Status of the RM230b Development Expenditure Allocation under 9MP (2006-2010) Sp en t in 2006-2008 102.542 119.219 Sp en t in 1Q 2009 Balance 8.239 Source: BNM, 9MP Mid-Term Review 29 May 2009 Page 3 of 5
  4. 4. 2009 Real GDP The Government is aggressively raising the money. RM39.977b of MGS and GII (+73.8%) has been issued year-to-date, a 73.8% jump from the same period last year. Therefore, there should be strong fiscal impulse in late-2009 and 2010 as the Government starts to spend the money raised and disbursed for implementation of the annual budgets and stimulus packages. And there are signs that things are moving. Major infrastructure projects are on the move, including the recent announcement that tunnelling works for the Pahang-Selangor raw water transfer project that will start next month. This will be followed by bidding processes for other works related to the project such as the Kelau dam and Langat water treatment plant next month – both are scheduled to start construction late this year. Local companies have been invited to submit “expressions of interest” for the Klang Valley LRT extension and upgrading works. We are also seeing signs of small- and mid-size projects (<RM500m) taking off, especially in East Malaysia. Malaysia: Gross Issuance of MGS & GII 70,000 140 120 60,000 100 50,000 80 40,000 60 30,000 40 20 20,000 0 10,000 (20) 0 (40) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD Gross MGS & GII Raised (RMm, LHS) Growth (% chg) Source: BNM Notable Large-scale Domestic Infrastructure Projects in the Pipeline Estimated (RM’m) Low cost carrier terminal (LCCT) 2,000 New Klang Valley LRT line 30,000 Klang Valley LRT extension (15km x 2) Pahang-Selangor water transfer (tunneling works) 1,200 Langat 2 water treatment plant 5,000 West Coast Expressway 3,000 High Speed Broadband 11,300 Sabah Oil Gas Terminal (SOGT) 3,000 Bakun Undersea Cable 9,000 Total 64,500 Source: Maybank-IB Further steps to liberalise the investment environment “soon”. In addition to announcing the change in the Government’s 2009 real GDP forecast, PM said that the Government will unveil new Foreign Investment Committee (FIC) rules soon without providing any details or hints. We believe this is to complement last month’s liberalisation measures on the 27 non-financial services sectors and the financial services sector. Announcement on the new FIC rulings could be made during the “Invest Malaysia” event at the end of June. 29 May 2009 Page 4 of 5
  5. 5. 2009 Real GDP Definition of Ratings Maybank Investment Bank Research uses the following rating system: BUY Total return is expected to be above 10% in the next 12 months HOLD Total return is expected to be between -5% to 10% in the next 12 months SELL Total return is expected to be below -5% in the next 12 months Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax Disclaimer This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. 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Published / Printed by Maybank Investment Bank Berhad (15938-H) (Formerly known as Aseambankers Malaysia Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, MaybanLife Tower, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136 29 May 2009 Page 5 of 5