You are on page 1of 2

PP 7767/09/2010(025354)

Economic Highlights
Global

MARKET DATELINE

10 May 2010

1 European Union Said To Be Looking At US$645bn Fund


to Calm The Sovereign Debt Crisis

2 US Unemployment Rate Inched Up But Non-Farm Payrolls


Rose In April; Consumer Credit Picked Up In March

Tracking The World Economy...

Today’s Highlight

European Union Said To Be Looking At US$645bn Fund to Calm The Sovereign Debt Crisis

European Union (EU) finance ministers were reported to have agreed to set up an unprecedented loan package worth
at least US$645bn to prevent Greece’s fiscal woes from spreading and shattering confidence in the euro. In seeing last
week’s slide in the euro to a 14-month low and soaring bond yields in Portugal and Spain, the Euroland governments
sketched out plans to make €440bn (US$570bn) available, with €60bn more from the EU’s budget, according to people
familiar with it. The International Monetary Fund (IMF) is asked to provide an unspecified additional sum as well.

Although the EU and the IMF have agreed to provide €110bn aid package to help Greece, the move failed to stabilise
the financial markets. Indeed, the slow reaction from the Euroland governments made investors skeptical about how
effective the aid package will be, causing the US and other equity markets to plunge. Investors expect the European
Central Bank (ECB) to do more, including extending taking other nations’ debt as collateral if the need arises, renew a
programme of lending unlimited cash to banks for a year, and even start buying government debt if the bailout plan for
Greece fails to stem the euro’s slide. The ECB, however, has resisted pressure from investors to take new steps to
contain the government fiscal strains after it eased rules on 3 May for the second time in a month to guarantee that
it will keep taking Greek government bonds as collateral for loans despite the downgrade. At the same time, it is trying
to convince investors that turmoil in the Euroland markets will subside once the Greek government draws on its €110bn
aid package and implements an austerity plan.

Meanwhile, the IMF announced that it has approved a €30bn standby loan to Greece, part of the €110bn rescue package
with the European Union, to help prevent a government debt crisis from engulfing other countries sharing the currency.

The US Economy

Unemployment Rate Inched Up But Non-Farm Payrolls Rose In April

◆ US unemployment rate inched up to 9.9% of total labour force in April, after remaining stable at 9.7%
for the last three consecutive months, as more people who had previously given up hope entered the workforce
to look for jobs in view of a pick-up in economic activities. Non-farm payrolls, on the other hand, recorded
an increase of 290,000 jobs in April, compared with a job gain of 230,000 in March. This was the fourth
consecutive month of increase in jobs, suggesting that the US economic recovery is becoming more
sustainable. The pick-up in jobs was reflected in the manufacturing and construction sectors, which added 44,000
and 14,000 jobs respectively in April. These were aided by further labour recruitment in the services industry,
which recorded an increase of 166,000 jobs in April, the fourth consecutive month of increase and compared with
a rise of 119,000 jobs in March. This was mainly on account of a pick-up in jobs in professional & business services

Peck Boon Soon


(603) 9280 2163
Please read important disclosures at the end of this report.
bspeck@rhb.com.my

A comprehensive range of market research reports by award-winning economists and analysts are Page 1 of 2
exclusively available for download from www.rhbinvest.com
10 May 2010

and leisure & hospitality sectors as well as a turnaround in jobs in financial services sector. A pick-up in
employment by the government sector also helped. These were, however, offset partially by a slowdown in
employment in retail trade and education & healthcare sectors. Indeed, the temporary government hiring of about
970,000 workers in April and May for the Census Bureau to conduct the population count that occurs every 10
years will likely have a big impact on payroll figures, when the bulk of the hiring will take place in the next few
months, and will then subtract from the job count the following months as employees are dismissed after the work
is done.

◆ Consumer Credit Picked Up In March

US consumer credit rose by US$1.9bn or at an annual rate of 1.0% in March, a rebound from a decline
of US$6.2bn or -3.0% in February. This was the second increase in three months, suggesting that consumers
are more willing to borrow and spend, albeit cautiously. A rise in confidence to finance spending was in line
with an improvement in the job market. This, in turn, will help support consumer spending in the country. The
pick-up was reflected in a faster increase in non-revolving debt (+US$5.1bn in March versus -US$0.2bn in
February), which include loans for automobiles and mobile homes. This was aided by a smaller contraction in
revolving debt (-US$3.2bn in March versus -US$6.0bn in February), such as credit cards. The Fed’s report does
not cover borrowing secured by real estate.

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI
and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under
such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on
generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to
opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This
report is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not
warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall
give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest
in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual
financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable for
all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages
investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an
investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents
accepts any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and
financing activities as well as providing investment banking and financial advisory services. In the ordinary course of its trading,
brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may trade or
otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of any
company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding
company and the respective directors, officers, employees and agents of each of them. Investors should assume that the
“Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities
have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been
reviewed by, and may not reflect information known to, professionals in other business areas of the “Connected Persons,”
including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have
received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive
factors and firm revenues.

A comprehensive range of market research reports by award-winning economists and analysts are Page 2 of 2
exclusively available for download from www.rhbinvest.com