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Focus Malaysia
a day ago
- Business
- Focus Malaysia
Core inflation holds firm at 1.8% in June amid mixed sectoral trends
HEADLINE inflation moderated slightly to +1.1% year-on-year (YoY) in Jun, coming in marginally below median consensus estimate of +1.2%. On a month-on-month (MoM) basis, inflation was unchanged at +0.1%, as a steeper decline in information & communication costs, coupled with a moderation in housing, utilities & other fuels, helped offset upward pressures from food & beverages (+0.2%), transport (+0.2%) and personal care (+0.4%). 'On a YoY basis, the disinflation was attributed to a sharper contraction in information & communication costs (-5.4% YoY), alongside softer inflation across transport (+0.3% YoY), restaurant & hotels (+2.8% YoY) and recreation services & culture (+0.8% YoY),' said Hong Leong Investment Bank. Meanwhile, food & beverages (+2.1% YoY), housing, utilities & other fuels (+1.7% YoY) and insurance & financial services (+1.5% YoY) continued to grow at a steady pace. The transport index eased to +0.3% YoY following slower price growth in public transport services (+0.3% YoY) and the operation of personal transport equipment (+0.3% YoY). However, on a MoM basis, the transport index rebounded by +0.2% amid stronger MoM inflation in the operation of personal transport equipment and public transport services. Food inflation remained unchanged at +2.1% YoY. 'Food at home' saw a price contraction of -0.4% YoY on the back of larger declines in vegetables (-7.2% YoY) and meat prices (-1.1% YoY), while prices of cereal products fell at a steady pace (-0.3% YoY) and prices of milk, dairy & eggs saw a smaller drop (-1.8% YoY). Conversely, 'food away from home' registered a further pickup in inflation (+4.7% YoY). Globally, food prices rose at a faster pace of +5.8% YoY, led by a larger price gain in meat. Despite broad disinflationary trends, services inflation inched higher to +2.0% YoY, supported by higher inflation in personal care (+4.2% YoY). Meanwhile, insurance & financial services inflation was stable (+1.5% YoY). Core inflation (DOSM) held steady at +1.8% YoY. Higher inflation in food & beverages (+3.8% YoY), transport (+2.3% YoY) and personal care (+4.2% YoY) was offset by a deeper contraction in information & communication services (-5.4% YoY), along with the easing in inflation of furnishings & household equipment (+0.1% YoY) and restaurants & hotels (+2.8% YoY). Headline and core CPI remained broadly stable in Jun, while producer prices saw a deeper contraction (-3.6% YoY) due to lower commodity prices and stronger ringgit. Price pressures from global commodities, particularly crude oil, are expected to remain subdued, amid persistent signs of oversupply in the market. With limited direct impact on CPI from fiscal reforms such as the SST and electricity tariff adjustments for households, we maintain our 2025 CPI forecast at +2.0% with assumption of RON95 adjustment sometime in 2H25. —July 23, 2025 Main image: Global Business Outlook
Malaysia Sun
2 days ago
- Automotive
- Malaysia Sun
Analysts foresee policy shifts to fuel EV market competition in Malaysia
KUALA LUMPUR, July 22 (Xinhua) -- Analysts have foreseen intensified competition for electric vehicles (EVs) in Malaysia amid policy changes in the country. Research house BIMB said in a note on Monday that Malaysia's EV market is approaching a key policy turning point, with the government expected to end completely built-up (CBU) import tax exemptions and the Approved Permit (AP) regime by year-end. "This decision will likely shape the direction of the market -- either accelerating liberalization and inviting more aggressive price competition or maintaining a controlled environment that protects local players," said the research house. BIMB noted that the policy outcome will not only affect the pace of EV adoption and pricing dynamics, but also influence the competitiveness of local original equipment manufacturers (OEMs), ongoing completely knocked down (CKD) investment strategies, and the overall outlook for the automotive sector. Hong Leong Investment Bank also highlighted in its note on Tuesday that it expects continued stiff competition for the 100,000 ringgit (23,624 U.S. dollars) to 200,000 ringgit price segment in Malaysia due to normalizing of consumer demand and aggressive new launches and sales campaigns. However, it foresees the EV segment in Malaysia continuing to gain momentum with a 4.6 percent market share in the first half. It also noted that the new customized incentive mechanism (NCM) is expected to materialize by the fourth quarter of 2025, in place of the current industrial linkage program (ILP). The NCM is being structured to encourage OEMs to expand localization activities at the local vendor level and thereby increase the ability of local suppliers to produce higher-value components. Further incentives are also being considered for EVs, in order to promote the development of this new technology in the local automotive ecosystem. Meanwhile, Kenanga Research in a note on Tuesday expects more favorable incentives from the Malaysian government, which has set a national target for EVs and hybrid vehicles of 20 percent of total industry volume (TIV) by 2030 and 38 percent by 2040. Kenanga opined that Malaysia's new vehicle sales will be supported by new battery EVs (BEVs) that enjoy sales and service tax (SST) exemptions and other EV facilities incentives up until 2025 for CBUs and 2027 for CKDs. While the exemption of import and excise duties for CBU EVs has partly driven EV adoption, RHB Investment Bank opined that it is unlikely to get extended beyond end-2025, as it thinks the government's focus will now be on attracting OEMs to manufacture and assemble their EVs locally, as CKD EVs will continue to enjoy a tax holiday until end-2027. According to the research house, an extension of the tax holiday for CBU EVs would be counter-productive for incentivizing OEMs to establish local production facilities. "While we expect EV numbers to continue picking up in the coming months, growth in market share is likely to remain moderate due to structural headwinds -- high pricing and limited availability of charging infrastructure. As such, EVs are unlikely to influence overall TIV in the near term," it said in its note on Tuesday.
Focus Malaysia
2 days ago
- Business
- Focus Malaysia
Malaysia's competitive edge intact amid modest US tariff gap
DESPITE renewed tariff threats, global markets have remained calm, suggesting complacency around risk of Trump acting on his protectionist plans in August. This may inadvertently embolden him and his confidence to take action could stem from several recent 'wins' such as the USD100 bil in tariffs collected with minimal economic drag, resilient US equities, along with his role in Israel-Iran tension. 'Currently, Malaysia's 25% US tariff rate is higher vs Indonesia (19%) and Vietnam (20%) has raised concerns, but the gap is modest and we believe is unlikely to deter foreign investments meaningfully,' said Hong Leong Investment Bank. Even if tariffs remain elevated, policy tools like tax incentives can cushion the impact, in our view. On a similar vein, Malaysia's high corporate tax rate of 24% vs Indonesia/Vietnam's 22%/20% has not historically hindered investments, backed by a strong manufacturing base and supply chain. We see these structural strengths will continue to make Malaysia an attractive destination under the global supply chain diversification or '+N' strategy. In any case, we remain optimistic Malaysia can still negotiate for a lower tariff rate. Locally, there is growing concern that Malaysia may be unable to secure a more favourable US tariff rate relative to regional peers, potentially undermining our national competitiveness. Although this risk warrants monitoring, we are not overly alarmed. The differential of 5-6ppt is modest and, in our opinion, unlikely to be material enough to meaningfully divert foreign investment away from our country. Earlier, the narrative of Malaysia benefiting from tariff arbitrage held stronger weight due to a significantly wider gap of 8-22ppt during April's Liberation Day episode. In contrast, the current disparity is far narrower. Even if Malaysia ends up with a relatively higher tariff rate, we believe it can be mitigated via strategic policy tools, including targeted tax incentives and capital allowances. On a similar vein, while Malaysia's corporate tax rate stands at a higher 24% vs Indonesia/Vietnam's 22%/20%, it has not historically undermined our competitiveness in luring foreign investments. This is thanks to our mature and integrated manufacturing ecosystem, supported by a well-developed local supply chain. Thus, we believe these structural strengths will continue to make Malaysia an attractive destination under the global supply chain diversification or '+N' strategy. Moreover, it is worth noting that any prospective tariff action by Trump would only affect Malaysia's exports to the US. Like many other nations, the government is actively working to diversify our export base and trade partners to mitigate potential shocks. In any case, we remain optimistic that Malaysia could still negotiate a more palatable tariff rate (<20%), especially seeing both Indonesia and Vietnam had successfully secured steep reductions (13-26ppt) despite their respective ties to BRICS and China. The upcoming 13th Malaysia Plan (13MP), which runs from 2026-30, is slated for tabling in Parliament at end-July. We see a higher Development Expenditure (DE) allocation of RM440 bil, in line with the RM90 bil/year pace from 2023-25 and continuing the upward trajectory seen in past plans. That said, the DE will be anchored by fiscal prudence to ensure adherence to the government's fiscal deficit target of 3.5% GDP between 2025-27. Overall, we anticipate the 13MP to adopt a globalist approach, particularly given the significant overlap with Trump's presidency through 2028. —July 22, 2025 Main image: LITE
The Star
3 days ago
- Business
- The Star
Glovemakers continue to face challenges
PETALING JAYA: The outlook for glovemakers remains dim as challenges since the beginning of the year including supply-demand pressures, lower average selling prices (ASPs) and the threat of US tariffs, continue to weigh on their operations and earnings. Hong Leong Investment Bank (HLIB) Research has reiterated a 'neutral' call on the glovemakers, with Kossan Rubber Industries Bhd being the only stock with a 'buy' call and an unchanged target price (TP) of RM2.30. It noted that Kossan stood out despite the rising market uncertainties due to the company's differentiated strategies in product customisation and automation, with a possibility of a rerating should there be consistent delivery of stronger earnings. The research house suggested that investors accumulate tactically and gradually, rather than taking full position at once, given the growing risk-off sentiment on glovemakers. 'Its solid financial footing, underpinned by a robust balance sheet with a net cash position of RM1.56bil (or 61 sen a share), the highest among peers under our coverage, further reinforces its resilience.' HLIB Research said there were growing concerns over supply-demand equilibrium in the second half of this year due to Intco Medical Technology Co Ltd, a Chinese medical consumables manufacturer, planning to produce more gloves in Indonesia and Vietnam. 'A projected 20 to 23 billion pieces per annum of new capacity is expected by end-2025. While this represents a modest 3.9% to 4.5% year-on-year increase from the estimated global supply of 515 billion pieces per annum in 2024, it would account for 44% to 51% of the estimated incremental demand of around 45 billion pieces per annum in 2025, substantial enough to disrupt the supply-demand dynamics. 'We believe Intco will continue to expand in 2026 and beyond, with the strategy to deliberately keep industry-wide plant utilisation rate below the equilibrium threshold of 85% to suppress ASPs and pressure regional competitors into razor-thin or negative margins,' it said.
The Star
3 days ago
- Business
- The Star
Moderate growth path
PETALING JAYA: Malaysia's economy is expected to remain on a moderate growth path through 2025, supported by resilient domestic demand but challenged by mounting global trade tensions, according to research houses. Despite the encouraging 4.5% year-on-year expansion in the second quarter of 2025 (2Q25) advance estimates, released by the Statistics Department on July 18, analysts cautioned that external uncertainties – especially ongoing tariff negotiations with the United States – could cap the upside for full-year growth. Hong Leong Investment Bank (HLIB) Research said that domestic demand would 'remain the key growth driver, underpinned by a healthy labour market and supportive government policy measures.' It also noted the role of rising tourism activity – evident in a 10.5 million tourist arrival count from January to May – and improving investment trends as key pillars of growth. 'The continuous improvement in tourism activity and healthy investment pipelines will provide further support to overall momentum,' it said. However, the research house warned that the country's growth prospect faces mounting pressures from an uncertain global environment, particularly due to the ongoing US-Malaysia trade negotiations. It maintained its 2025 gross domestic product (GDP) forecast at 4% and projecting no change to the overnight policy rate (OPR) for the rest of the year. Similarly, CIMB Research highlighted domestic demand's resilience but flagged a more cautious trajectory for the rest of the year. 'Overall, the 2Q25 advance GDP figures reaffirmed domestic demand as the key growth anchor, offsetting persistent external sector headwinds,' it said. The economy expanded by 4.4% in the first half of 2025 (1H25), a moderation from 5% in 1H24. CIMB Research kept its GDP forecast unchanged at 4.3%, but warned: 'Should existing US tariffs of 25% remain in place beyond the Aug 1 deadline, we estimate that the GDP growth could ease further to around 4%, mainly due to a potential drag on external demand.' CGS International (CGSI) Research took a more cautionary tone regarding the external environment. 'We suspect that the softening growth in 2Q25 marks the start of a slowdown in external demand,' it said, citing the implementation of revised US tariffs. However, CGSI Research acknowledged potential reprieve, adding: 'We think that tariff execution date remains a moving goal post, based on US President Donald Trump's open stance on negotiations.' Domestically, it pointed to labour reforms, stable inflation, and tourism as buffers and maintained a 2025 GDP growth projection of 4.2%, down from 5.1% in 2024. TA Research also maintained a steady outlook, holding its GDP forecast at 4.4%. While it recognised headwinds from trade frictions, it highlighted supportive domestic conditions. 'The recent cut in the OPR is expected to provide a boost to economic activity, particularly through improved consumer and business sentiment in 2H25,' the research house said. BIMB Research provided a range-bound estimate, placing maximum potential GDP growth at 4.5% for 2025, though citing 4% as a more likely baseline given downside risks. 'Slowdown of exports of goods and coupled with slight moderation on investment activities are the dragging factors for this revision,' it said. It added that despite tariff exclusions and pauses, growth is subjected to direct and indirect effects of the heightening global trade war. The finalised 2Q25 GDP figures are scheduled for release on Aug 15, and will be closely watched for further insights into the country's economic trajectory amid global volatility.
