PP16832/01/2012 (029059)

Malaysia
Economics
19 January 2012

Consumer Price Index

CPI, Dec 2011

Trending down
Inflation in the final month of 2011 eased to +3.0% YoY. (Nov11: +3.3% YoY, Maybank-KE: +3.0% YoY; Consensus +3.1% YoY) as the high base effect from last years rise in fuel and sugar prices from the subsidy rationalisation programme came into play. MoM, the Consumer Price Index (CPI) increased by 0.1%. Core inflation, which excludes the volatile food, fuel and housing components of the CPI, remained at 2.2% YoY for a second consecutive month. Inflation rate for the full year of 2011 was in line with our estimate of +3.2% (2010: +1.7%).
Malaysia: Consumer Price Index (CPI, 2010=100)
% YoY Total Food and NonAlcoholic Beverages Alcoholic Beverages and Tobacco Clothing and Footwear Housing, Water, Electricity, Gas and Other Fuels Furniture, Household Equipment and Routine Household Maintenance Health Transport Communication Recreation Services and Culture Education Restaurants & Hotels Miscellaneous Goods & Services Source: Dept. of Statistics Sept 11 3.4 5.0 6.0 (0.6) 2.0 Oct 11 3.4 5.7 0.0 (0.5) 2.0 Nov 11 3.3 5.1 0.0 0.1 1.8 Dec 11 3.0 5.1 0.0 0.8 1.7 2011 3.2 4.8 4.6 (0.2) 1.8 2010 1.7 2.4 4.0 (1.4) 1.1

Suhaimi Ilias suhaimi_ilias@maybank-ib.com (603) 2297 8682 Ramesh Lankanathan ramesh@maybank-ib.com (603) 2297 8685 William Poh william.poh@maybank-ib.com (603) 2297 8683

2.2

2.2

2.3

2.5

1.8

0.7

3.0 3.9 (0.5) 3.0 2.2 6.3 3.7

3.1 4.0 (0.5) 3.2 2.3 6.1 3.0

3.0 3.9 (0.5) 3.4 2.8 6.2 3.2

2.8 1.9 (0.6) 3.4 2.8 5.8 3.1

2.7 4.4 (0.3) 2.0 2.2 5.9 2.4

1.6 1.6 (0.2) 1.6 1.7 2.0 2.7

Fuel-related Transport component led the headline inflation rate lower. The Transport component of the CPI eased to +1.9% YoY in Dec 11 from +3.9% YoY in the previous month due to the base effect that came about from fuel pump price increases that took place in Dec 10, as the government moved forward with its subsidy rationalisation plan to administer the countrys finances in a more efficient manner. Prices for RON 97 were raised by 15sen to RM 2.30/litre, RON 95 by 5sen to RM 1.90/litre, diesel by 5sen to RM 1.80/litre and LPG by 5sen to RM 1.90/kg.

Kim Eng Hong Kong is a subsidiary of Malayan Banking Bed

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Malaysia: CPI, Dec 11

Amid mixed trends in the food component The CPI sub-index Food & Non-Alcoholic Beverages (FNAB) stayed at +5.1% YoY in Dec 11 as components within the FNAB index recorded mixed movements. The highest gain in prices were chalked up by Fish & Seafood (Dec 11: +9.1% YoY; Nov 11: +6.4% YoY), due to the effect of monsoon season that reduced catches. At the other end of the scale was the sharp easing of prices of Sugar, Jam, Honey, Choc & Confectionery (Dec 11: +5.7% YoY; Nov 11: +10.5% YoY) as the effect from the increase in the subsidised prices of sugar by 20 sen/kg to RM2.10/kg in Dec 10 wear off. Global food prices continued to moderate... The Food and Beverage Index as tracked by the IMF contracted by -8.4% YoY in Dec 11 (Nov 11: -0.3% YoY), marking the second consecutive month of YoY decline. This compared to the high of +37.1% YoY recorded in Feb 11 when a record number of staple food items registered sharp price gains. while crude oil prices rose on heightened tensions in the Middle East. Energy prices on the other hand have moved in the opposite direction on a fresh round of tensions in the Middle East as Western nations put pressures and imposed sanctions on Iran the worlds second largest producer of crude oil after Saudi Arabia due to its uncooperative stance with regard to its nuclear programme. This has led to worries of disruption in the global crude oil supply following Iranian threat to retaliate by blocking the Strait of Hormuz, where an estimated 20% of global crude oil supply passes. West Texas Intermediate (WTI) prices have risen to above the USD 100/bbl mark (2011 average: USD 95/bbl) in the first two weeks of 2012. Overall, global inflation rate decelerating on softening global economy. Our measure of global inflation in Nov 11 was +3.2% YoY, down from +3.4% YoY in the preceding month. Almost all major countries that have released Dec 11 data reported lower inflation rate figures except for Taiwan (Dec 11: +2.0% YoY; Nov 11: +1.0% YoY) which recorded higher numbers, while South Korea (Dec 11: +4.2% YoY; Nov 11: +4.2% YoY) recorded no change. Maintain our forecast for Malaysias CPI in 2012. We expect the annual inflation rate to average +2.7% in 2012. However, we see a Vshaped monthly inflation rate this year i.e. CPI easing to as low as 2.3% by 2Q 2012 before inching up back to just above 3% average in 4Q 2012. This projected trend reflects our view that the subsidy rationalisation programme is being temporary suspended until mid-2012 amid speculation of general election taking place within 1H 2012, before being reinstated thereafter. At the same time, we expect the OPR to remain stable at 3% until the end of 2012. Bank Negara Malaysias first Monetary Policy Committee (MPC) meeting for this year will be on 31 Jan.

19 January 2012

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Malaysia: CPI, Dec 11

Malaysia: Headline & Core CPI (% YoY)

3.5 8 3.0 6 2.5 4 2 (1) (3)
Oct-08 Oct-09 Oct-10 Aug-11 Dec-08 Dec-09 Dec-10 Aug-08 Aug-09 Aug-10 Oct-11 Apr-08 Apr-09 Apr-10 Apr-11 Dec-11 Jun-08 Jun-09 Jun-10 Jun-11 Feb-09 Feb-10 Feb-11

Malaysia: Key CPI Components (% YoY)

14 12 10 8 6 4 2
0.5

25 20 Transport (RHS) 15 10 5 0 Food & Non-Alcoholic Beverages (5) (10) (15) (20) Utilities, Housing & Other Fuels
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jul-07 Jul-08 Jul-09 Jul-10 Oct-07 Oct-08 Oct-09 Oct-10 Jul-11 Oct-11
Others

2.0 1.5 1.0

(25)
Apr-09 Apr-10 Apr-11

Apr-07

Headline CPI (LHS)

"Core" CPI

Source: Dept of Statistics, Maybank-KE

Source: Dept of Statistics, Maybank-KE

CPI: Monthly contribution to growth (ppts)

2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0
Food and Non-Alcholic Beverages

CPI: Annual contribution to growth (ppts)

3.0
Nov-11 Dec-11
2007 2008 2009 2010 2011

Aug-11

Sep-11

Oct-11

2.0

1.0

0.0
Food and Non-Alcholic Beverages Housing, Water, Electricity, Ga s & Other Fuels Alcoholic Beverages & Tobacco Restautants & Hotels Transport (incl. fuel)

Alcoholic Beverages & Tobacco

Restautants & Hotels

Transport (incl. fuel)

Others

Housing, Water, Electri city, Gas & Other Fuels

(1.0)

(2.0)

Source: Dept. of Statistics, Maybank-KE

Source: Dept. of Statistics, Maybank-KE

Global: Prices of Major Food Commodities (% chg)

USDA Cattle Cocoa Coffee Yellow Corn Cotton Soybean Meal Yellow Soybean Soybean Oil Wheat Sugar Spot Maize Index Sugar Index Soy Oil Index Thai White Rice Source: Bloomberg 1 Month 0.3 0.8 (1.8) (6.9) (6.8) (7.1) (5.3) (0.8) (8.1) 13.5 1.6 11.5 (0.2) (4.3) 3 Months 6.3 18.2 (11.5) (18.8) (15.2) (20.2) (17.4) (5.8) (14.4) 1.6 (15.6) 15.8 (4.3) (6.3) 6 Months 12.6 34.0 (8.4) (20.6) (42.7) (18.8) (17.2) (9.1) (28.5) (13.2) (4.1) 16.8 0.6 (1.8) YTD 14.0 81.5 (7.9) 1.1 (35.6) (23.2) (15.9) (4.3) (23.8) (14.1) 3.6 8.3 2.2 0.4 1 Year 22.8 68.3 10.8 20.3 (22.0) (15.2) (5.9) 12.1 (6.9) 41.9 12.4 9.6 14.4 (9.5)

19 January 2012

Apr-08

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Malaysia: CPI, Dec 11

Global: Prices of Metal Commodities (% chg)

Gold Silver Platinum Palladium Aluminum Lead Tin Zinc Nickel Copper Source: Bloomberg 1 Month 3.6 2.7 2.9 (3.1) (2.6) 5.5 (4.0) 7.5 (6.6) 2.6 3 Months (6.9) (23.1) (16.4) (21.8) (11.4) (10.7) (9.0) (9.9) (15.8) (15.9) 6 Months 12.1 (8.1) (11.2) (18.5) (17.2) (19.5) (25.0) (9.8) (25.4) (19.2) YTD 19.7 4.3 (12.0) (25.7) (16.2) (20.8) (22.7) (20.9) (29.1) (23.6) 1 Year 23.6 17.2 (5.7) (13.5) (9.5) (10.2) (14.4) (9.3) (18.8) (11.6)

Global: Prices of Energy Commodities (% chg)

Crude Oil Coal Natural Gas Source: Bloomberg 1 Month 12.0 (5.5) (14.1) 3 Months 16.2 (4.2) (23.2) 6 Months (1.8) (3.0) (24.7) YTD 6.9 (9.9) (27.9) 1 Year 20.3 3.7 (23.2)

Global: Commodity Price Indices

250 230 210 190 170 150 130 110 90 70
Jan-05 Jan-09 Jan-06 Jan-07 Jan-08 Jan-10 May-07 May-08 May-09 May-10 Jan-11 May-11 May-05 May-06 Sep-05 Sep-06 Sep-07 Sep-10 Sep-11 Sep-08 Sep-09

Global: Inflation (% YoY)

6 5 4 3 2 1 0
Oct-04 Apr-01 Sep-07 Apr-08 Nov-01 Nov-08 Sep-00 Aug-03 May-05 Aug-10 Dec-05 Jun-09 Jun-02 Jan-03 Feb-07 Jan-10 Feb-00

(1)

Food & Beverages

Energy & Fuel

Industrial Input

Source: IMF

Source: Bloomberg, CEIC, Maybank-KE

19 January 2012

Mar-04

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Mar-11

Oct-11

Jul-06

Malaysia: CPI, Dec 11

Global: Headline Consumer Price Index (YoY, %)

May-11 Global US Eurozone Japan Germany UK OECD China India Russia Brazil S. Korea Taiwan Hong Kong Singapore Indonesia Thailand Malaysia Philippines Vietnam 3.4 3.6 2.7 (0.4) 2.4 4.5 3.1 5.5 9.6 9.6 6.6 3.9 1.7 5.2 4.5 Jun-11 3.5 3.6 2.7 (0.4) 2.4 4.2 3.0 6.4 9.5 9.4 6.7 4.2 2.0 5.6 5.2 Jul-11 3.5 3.6 2.5 0.2 2.6 4.4 3.1 6.5 9.4 9.0 6.9 4.5 1.3 7.9 5.4 4.6 4.1 3.4 5.1 22.2 Aug-11 3.5 3.8 2.5 0.2 2.5 4.5 3.2 6.2 9.8 8.2 7.2 4.7 1.3 5.7 5.7 4.8 4.3 3.3 4.7 23.0 Sep-11 3.5 3.9 3.0 0.0 2.9 5.2 3.2 6.1 10.0 7.2 7.3 3.8 1.4 5.8 5.5 4.6 4.0 3.4 4.8 22.4 Oct-11 3.4 3.5 3.0 (0.2) 2.9 5.0 3.1 5.5 9.9 7.2 7.0 3.6 1.3 5.8 5.4 4.4 4.2 3.4 5.2 21.6 Nov-11 3.2 3.4 3.0 (0.5) 2.8 4.8 3.1 4.2 9.1 6.8 6.6 4.2 1.0 5.7 5.7 4.2 4.2 3.3 4.8 19.8 Dec-11 2.7 2.3 4.2 4.1 7.5 6.1 6.5 4.2 2.0 3.8 3.5 3.0 4.2 18.1 YTD 11 3.3 3.2 2.7 (0.3) 2.5 4.5 2.9 5.4 9.4 8.5 6.6 4.0 1.4 5.2 5.2 5.4 3.8 3.2 4.8 18.6 2010 2.2 1.6 1.6 (0.7) 1.2 3.3 1.9 3.3 9.6 6.9 5.0 3.0 1.0 2.4 2.8 5.1 3.3 1.7 3.8 9.2

6.0 5.5 4.2 4.1 3.3 3.5 5.1 5.2 19.8 20.8 Source: Bloomberg, CEIC, Maybank-KE

Global: Core Consumer Price Index (YoY, %)

US Eurozone Japan UK OECD China S. Korea Taiwan May-11 1.5 1.5 (0.8) 3.3 1.6 2.9 3.2 1.2 Jun-11 1.6 1.6 (0.8) 2.8 1.6 3.0 3.5 1.2 Jul-11 1.8 1.2 (0.5) 3.1 1.7 2.9 3.6 1.1 4.5 2.6 2.2 3.7 Aug-11 2.0 1.2 (0.5) 3.1 1.8 3.0 3.5 1.2 2.7 2.9 2.6 3.4 Sep-11 2.0 1.6 (0.4) 3.3 1.9 2.9 3.3 1.2 2.8 2.9 2.5 3.5 Oct-11 2.1 1.6 (1.0) 3.4 1.9 2.7 3.2 1.5 2.9 2.9 2.0 3.9 Nov-11 2.2 1.6 (1.1) 3.2 2.0 2.2 3.5 1.2 2.8 2.9 2.2 3.7 Dec-11 1.6 3.0 1.9 3.6 2.3 2.8 2.7 2.2 3.4 YTD 11 1.6 1.4 (0.9) 3.2 1.6 2.7 3.2 1.2 4.3 2.4 2.0 3.6 2010 1.0 1.0 (1.3) 2.9 1.3 1.4 1.8 0.4 3.7 0.9 1.2 3.7

Indonesia 5.5 5.6 Thailand 2.5 2.6 Malaysia 2.1 2.1 Philippines 3.7 4.0 Source: Bloomberg, CEIC, Maybank-KE

19 January 2012

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Malaysia: CPI, Dec 11

APPENDIX 1
Definition of Ratings
Maybank Investment Bank Research uses the following rating system: BUY HOLD SELL Total return is expected to be above 10% in the next 12 months Total return is expected to be between -5% to 10% in the next 12 months 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 BV = Book Value CAGR = Compounded Annual Growth Rate Capex = Capital Expenditure CY = Calendar Year DCF = Discounted Cashflow DPS = Dividend Per Share EBIT = Earnings Before Interest And Tax EBITDA = EBIT, Depreciation And Amortisation EPS = Earnings Per Share EV = Enterprise Value FCF = Free Cashflow FV = Fair Value FY = Financial Year FYE = Financial Year End MoM = Month-On-Month NAV = Net Asset Value NTA = Net Tangible Asset P = Price P.A. = Per Annum PAT = Profit After Tax PBT = Profit Before Tax PE = Price Earnings PEG = PE Ratio To Growth PER = PE Ratio QoQ = Quarter-On-Quarter ROA = Return On Asset ROE = Return On Equity ROSF = Return On Shareholders Funds WACC = Weighted Average Cost Of Capital YoY = Year-On-Year YTD = Year-To-Date

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 securitys 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. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad and consequently no representation is made as to the accuracy or completeness of this report by Maybank Investment Bank Berhad and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Berhad, its affiliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forwardlooking statements. Maybank Investment Bank Berhad expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. This report is prepared for the use of Maybank Investment Bank Berhad's clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of Maybank Investment Bank Berhad and Maybank Investment Bank Berhad accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

19 January 2012

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Malaysia: CPI, Dec 11

APPENDIX 1
Additional Disclaimer (for purpose of distribution in Singapore)
This report has been produced as of the date hereof and the information herein maybe subject to change. Kim Eng Research Pte Ltd ("KERPL") in Singapore has no obligation to update such information for any recipient. Recipients of this report are to contact KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. As of 19 January 2012, KERPL does not have an interest in the said company/companies.

Additional Disclaimer (for purpose of distribution in the United States)

This research report prepared by Maybank Investment Bank Berhad is distributed in the United States (US) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Kim Eng Securities USA, a brokerdealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Kim Eng Securities USA in the US shall be borne by Kim Eng. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. This report is not directed at you if Kim Eng Securities is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Kim Eng Securities is permitted to provide research material concerning investments to you under relevant legislation and regulations. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply if the reader is receiving or accessing this report in or from other than Malaysia. As of 19 January 2012, Maybank Investment Bank Berhad and the covering analyst does not have any interest in in any companies recommended in this Market themes report. Analyst Certification: The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Additional Disclaimer (for purpose of distribution in the United Kingdom)

This document is being distributed by Kim Eng Securities Limited, which is authorised and regulated by the Financial Services Authority and is for Informational Purposes only.This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

Published / Printed by

Maybank Investment Bank Berhad (15938-H) (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, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136 http://www.maybank-ib.com

19 January 2012

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