May 24, 2012

REGION AL

MALAYSIA SINGAPORE INDONESIA THAILAND PHILIPPINES CHINA, HONG KONG

ECONOMIC UPDATE

CIMB Analyst

1Q12 GDP Hurdles along the way

Domestic demand continues to keep the economy afloat, helping to buffer the weak export engine. Real GDP expanded 4.7% yoy in 1Q12 with still-respectable consumer spending carrying the growth baton. We keep our 3.8% growth estimate this year for now given 1) renewed eurozone debt fears, and 2) weak high frequency data for the US and China. If conditions in the eurozone deteriorate more rapidly than expected, there could be sharper declines in global asset markets and risk appetite. The spillover would dampen domestic consumer and business sentiments.

Lee Heng Guie

T (60) 3 20849667 E hengguie.lee@cimb.com

At this point in time, we do no see a need to revise 2012 GDP growth forecast because that 4-5% is mainly driven by domestic demand. We already priced in the prospects of significantly lower export growth.
Tan Sri Dr Zeti Akhtar Aziz, Governor of BNM

Growth slows but still respectable in 1Q12

Backed by improved global economic prospects in 1Q12 before tensions in the euro area coming to fore, the Malaysian economy posted decent GDP growth of 4.7% yoy in 1Q12 (5.2% in 4Q11), although this marks two consecutive quarters of easing. 1Q12 GDP growth was in line with our projection of 4.5% but above consensus forecast (4.3%). Malaysias 1Q12 GDP growth outperformed Thailand (0.3%), South Korea (2.8%) and Singapore (1.6%) but was lower against China (8.1%) and Indonesia (6.3%).

anchored by domestic demand

With net trade taking a back seat, the overall growth was powered by domestic demand growth (9.6%), which added 7.9% pts to 1Q12 GDP growth (+9.1% pts in 4Q11). Consumer demand received a boost from generous cash handouts and 7-13% pay rise for 1.4m civil servants although spending on big ticket items was restrained by the prudent lending guideline. Total investment growth surged 16.1% (8.4% in 4Q11) on acceleration in private and public investments.

Shaky external conditions cloud 2H12 outlook

While domestic drivers continue to steady the ship, we remain wary about the vulnerable global economy given the high degree of uncertainty about how the euro area crisis will play out. If conditions in the eurozone deteriorate more rapidly than expected, the spillover would dampen domestic consumer and business sentiments. As such, we are keeping our GDP growth estimate of 3.8% this year for now, allowing us to assess the still-shaky external conditions.
Figure 1: Snapshot of economic indicators
--------------2011 Real GDP growth Domestic demand Net trade Government revenue Government operating expenditure Government development expenditure Fiscal balance (% of GDP) 5.1 8.2 -7.4 16.1 20.4 -12.1 -4.8 % yoy (otherwise stated) 1Q11 5.1 8.2 -27.4 38.4 21.2 -12.0 -2.5 2Q11 4.3 5.4 8.7 18.3 9.5 -31.3 0.4 3Q11 5.7 8.7 10.5 12.1 26.6 0.3 -5.7 ------------------- 4Q11 5.2 10.4 -10.5 4.0 23.6 -8.4 -11.1 1Q12 4.7 9.6 -20.8 20.4 18.0 32.3 -2.6

SOURCES: BNM, DEPARTMENT OF STATISTICS (DOS), CIMB RESEARCH

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
Designed by Eight, Powered by EFA

ECONOMIC UPDATE
May 24, 2012

GDP growth slows further to 4.7% yoy in 1Q12

In tandem with slowing growth momentum in regional economies, Malaysias real GDP growth eased for the second consecutive quarter to 4.7% yoy in 1Q12 (5.2% in 4Q11). This was in line with our projection (4.5%) but above market consensus (4.3%). On a qoq basis, real GDP growth declined 3.2% (+1.8% in 4Q11). There were revisions made to past data series, reflecting the change in the base year from 2000 to 2005.
Figure 2: Real GDP grew 4.7% yoy in 1Q12
% pt contribution 12 % yoy 6

Figure 3: Most regional countries posted slower growth in 1Q12

% yoy
15

% yoy

Title: Source:

24

10

16

Please fill in the values above to have them entered in your rep
4 4 5 8

-4

-5

-8

-8 1Q11 2Q11 3Q11 4Q11 1Q12

-10 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12

-16

Domestic demand Changes in stocks

Net exports GDP growth (RHS)

Korea Singapore (RHS)

Indonesia China (RHS)

Thailand

SOURCES: BNM, DOS, CIMB RESEARCH

SOURCES: DOS, BLOOMBERG, CEIC, CIMB RESEARCH

Domestic drivers steady the ship

Domestic demand has generally remained steady, growing at a faster pace of 9.6% in 1Q12 (10.4% in 4Q11), which buffered against the impact of the weakening external environment. In total, total domestic demand, excluding stocks, added 7.9% pts to 1Q12 GDP growth (+9.1% pts to 4Q11 GDP growth).
Figure 4: Real GDP by demand-side components
---------------------2011 Real GDP Priv. consumption Public consumption Investment Exports Imports 5.1 7.1 16.1 6.5 4.2 6.2 1Q11 5.1 6.9 11.1 9.8 1.9 9.3 % yoy 2Q11 4.3 6.6 6.0 2.7 4.6 4.0 3Q11 5.7 7.6 21.1 5.4 4.8 3.9 ---------------------- 4Q11 5.2 7.3 22.9 8.4 5.5 7.8 1Q12 4.7 7.4 5.9 16.1 2.8 6.8 % pt contr.* 1Q12 4.7 3.7 0.6 3.6 2.8 5.9 % of GDP 1Q12 100.0 50.8 11.1 25.0 99.0 87.9

* Change in stocks deducted 0.25% pts from 1Q12s GDP growth. SOURCES: BNM, DOS, CIMB RESEARCH

Consumer spending rose 7.4% in 1Q12 (7.3% in 4Q11), benefitting from robust employment growth and steady income expansion in addition to the boost from cash handouts of RM500 to each household earning RM3,000 and below. As at 17 Apr, a total of RM2.1bn was disbursed to 4.3m households. Private consumption indicators showed a mixed trend, especially the purchase of big ticket items (i.e. cars), which was somewhat restrained by Bank Negara Malaysias net income rule for the computation of debt service ratios for all household loan applications. We expect private consumption to advance 6.0-6.5% this year.

ECONOMIC UPDATE
May 24, 2012

Figure 5: Improved business and consumer sentiments

Index
140

Figure 6: Positive employment prospects

Person (th)
10

Title: Source:

4.5

120

4.0

Please fill in the values above to have them entered in your rep
100 6 3.5

80

3.0

60

2.5

40 1Q00 2Q01 3Q02 4Q03 1Q05 2Q06 3Q07 4Q08 1Q10 2Q11

0 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

2.0

MIER consumer sentiment

MIER business conditions

Total retrenchments

Unemployment rate

SOURCES: CEIC

SOURCES: CEIC

Growth in total investment also surged strongly by 16.1% (8.4% in 4Q11), largely fuelled by a 19.8% growth in private investment (a share of 63.9% of total investment) and a 10.3% growth in public investment. The surprisingly strong private investment was supported by large capital spending in the oil and gas as well as manufacturing sectors. Private investment indicators point to a continued expansion of private capital spending: 1) Capacity utilisation remained high at 80% in 1Q12 while capital goods imports, mainly machinery and equipment, rose 21% in 1Q12; 2) Approved manufacturing investment projects grew 11.6% yoy to RM15.1bn in 1Q12; 3) FDI into Malaysia was higher at RM7.5bn in 1Q12 (RM6.5bn in 4Q11), reflecting continued investment in the manufacturing, services and oil and gas industries. While the improved business climate, brought about by the Economic Transformation Programme, would spur investment and business activity over the medium term, the shaky external environment would act as a dampener on investor sentiment. On public investment, there was higher federal governments capital spending on the public utilities and trade and industry, as well as capital spending by the non-financial public enterprises in the transportation and mining sectors.
Figure 7: Private consumption indicators
% yoy 60

Figure 8: Private investment indicators

% yoy
28

% yoy
45 30

% yoy

Title: Source:

18 15

45 30 15 0 -15 -30 -45 Jan-01 May-02 Sep-03 Jan-05 May-06 Sep-07 Jan-09 May-10 Sep-11 Imports of consumption goods Consumption credit (RHS) Sales of passenger cars

24 20 16 12

Please fill in the values above to have them entered in your rep
15 0 -15 12 9 6 3 0 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

8 -30 4 -45 0 Jan-08

Commercial vehicle sales Business loans (RHS)*

Imports of capital goods

SOURCES: DOS, CEIC, CIMB RESEARCH

*Business loan growth differs from Bank Negara Malaysia as it derived from total loans minus household loans and others. SOURCES: DOS, CEIC, CIMB RESEARCH

ECONOMIC UPDATE
May 24, 2012

Figure 9: Overall capacity utilization rate in the manufacturing sector

%
90

Figure 10: Higher net FDI of RM7.5bn in 1Q12

RM bn
18

Title: Source:

15 80 12 9 6 60 3 0 50 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 -3 1Q04 4Q04 Capacity utilization rate (CUR) CUR: domestic-oriented CUR: export-oriented Foerign direct investment into Malaysia 3Q05 2Q06 1Q07 4Q07 3Q08 2Q09 1Q10 4Q10 3Q11

Please fill in the values above to have them entered in your rep

70

SOURCES: BNM, CIMB RESEARCH

SOURCES: DOS, BNM, CIMB RESEARCH

Net trade takes a back seat

Weak exports are taking its toll on overall GDP growth as net trade subtracted 3% pts from 1Q12 GDP growth (-1.3% pts in 4Q11). Real exports of goods and services growth slowed to 2.8% (5.5% in 4Q11), relative to import expansion of 6.8% in 1Q12 (7.8% in 4Q11). High-frequency indicators such as global and regional PMIs as well as global semiconductor sales rose at an uneven pace in recent months, suggesting that Malaysias export growth for this year is still under threat. In Mar, Malaysias exports to the EU plunged 16.2%, indicating that the euro area is still struggling under the weight of the double whammy of debt crisis and fiscal austerity.

Most sectors registered slower growth

Expansion in the services sector slowed to 5% in 1Q12 (6.6% in 4Q11), reflecting easing growth momentum in some sectors, including wholesale and retail trade (6.4% vs. 6.8% in 4Q11), finance and insurance (2% vs. 7.1% in 4Q11), transport and storage (5.9% vs. 6% in 4Q11), accommodation and restaurant (6.1% vs. 6.3% in 4Q11). Higher growth was recorded in the communication (9.4% vs. 8.8% in 4Q11) as well as real estate and business services (6.9% vs 4.4% in 4Q11). The manufacturing sector paced slower to 4.2% growth (5.2% in 4Q11), mainly dragged by modest growth in the export-oriented industries (2.7% vs 2.9% in 4Q11). Growth in the production of domestic-oriented industries remained steady at 9.8% (12.8% in 4Q11), supported by the construction-related materials (10.3% vs. 12.3% in 4Q11), transport equipment (7.1% vs. 15.1% in 4Q11) and food, beverage and tobacco products (9.7% vs 9.8% in 4Q11). Growth of the agriculture sector slowed to 2.1% from 6.9% in 4Q11 due to lower output of palm oil and rubber. The construction sector recorded a robust growth of 15.5% (7.5% in 4Q11), underpinned by the ongoing implementation of 10MP projects such as the light rail transit extension. The residential sub-sector rose by 24.1% spurred by the high-end residential projects. The mining sector rose marginally by 0.3% (-3.8% in 4Q11) due to a 1.3% growth in the production of crude oil while the natural gas output declined by a marginal 0.2%.

ECONOMIC UPDATE
May 24, 2012

Figure 11: Real GDP by supply-side sectors

---------------------2011 Real GDP Agriculture Mining Construction Manufacturing Services 5.1 5.9 -5.7 4.6 4.7 7.0 1Q11 5.1 -0.2 -3.9 5.1 5.7 7.1 % yoy 2Q11 4.3 7.7 -9.3 1.8 2.6 7.1 3Q11 5.7 8.8 -5.9 4.0 5.4 7.1 ---------------------- 4Q11 5.2 6.9 -3.8 7.5 5.2 6.6 1Q12 4.7 2.1 0.3 15.5 4.2 5.0 % pt contr.* 1Q12 4.7 0.1 0.03 0.4 1.1 2.7 % of GDP 1Q12 100.0 6.9 9.4 3.2 25.3 54.0

*Import duties added 0.28% pt to 1Q12s GDP growth. SOURCES: BNM, DOS, CIMB RESEARCH

Figure 12: Services sector indicators

2010 Utilities Electricity Production Index Wholesale, Retail Trade, Hotels and Insurance Consumption credit outstanding Loans to wholesale & retail trade, hotels & restaurants Tourist arrivals Tourist arrivals Passenger car sales Loans outstanding in the banking system Loans to real estate Bursa Malaysia turnover (volume) Transport, Storage and Communication Total cargo handled at the 5 major ports (tonnes) Airport passenger traffic Air cargo handled % yoy % yoy % yoy 14.9 12.7 14.2 10.1 10.7 -2.0 8.7 13.3 -5.1 8.6 10.8 -2.9 10.3 7.2 -0.1 6.5 -1.4 11.6 n.a. n.a. 8.1 n.a. n.a. -0.2 n.a. n.a. n.a. n.a. % yoy % yoy Persons m % yoy % yoy % yoy % yoy % yoy 9.8 7.5 24.6 3.9 11.8 12.7 21.0 2.1 9.5 11.5 24.7 0.6 -1.6 13.6 31.2 30.0 8.7 6.8 5.8 -4.8 -11.3 13.5 23.8 20.4 8.5 9.6 6.7 4.7 0.3 13.8 28.7 8.9 9.5 11.5 6.7 5.4 -2.0 13.6 31.2 24.5 7.8 11.7 -13.8 12.2 33.6 16.8 9.5 11.5 2.3 6.9 -13.6 13.6 31.2 44.8 8.8 10.1 -25.7 12.1 32.7 -15.0 8.2 8.3 6.6 11.9 34.0 41.3 7.8 11.7 -16.6 12.2 33.6 34.0 % yoy 8.8 2.0 1.3 4.2 2.3 6.1 3.1 2.7 11.3 4.9 2011 2Q11 3Q11 4Q11 1Q12 Dec-11 Jan-12 Feb-12 Mar-12

Finance, Insurance, Real Estate and Business Services

SOURCES: DOS, BNM, CEIC, CIMB RESEARCH

Federal governments deficit at 2.6% of GDP in 1Q12

The federal governments budget deficit improved to RM5.8bn or 2.6% of GDP in 1Q12, compared to a deficit of RM25.4bn or 11.1% of GDP in 4Q11. This was made possible by better revenue collection (+20.4% to RM47.9bn) relative to operating expenditure growth (+18% to RM45.6bn) and development expenditure (+32.3% to RM8.5bn). Development expenditure was channeled mainly to the trade and industry, and public utilities. For 2012, the budget deficit is expected to come down to 4.7% of GDP from revised 4.8% in 2011.
Figure 13: Fiscal deficit at 2.6% of GDP in 1Q12
RM bn
10

Figure 14: Revenue vs. expenditure

% of GDP
10

% yoy
60

% yoy

Title: Source:

160

5 0 -5 -10 -15 -20 -25 1Q05 4Q05 3Q06 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11 4Q11

5 0

45

120

Please fill in the values above to have them entered in your rep
30 80

-5
15 40

-10 0 -15 -20 -25 -15 -40 0

-30 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12

-80

Fiscal balance

% of GDP (RHS)

Revenue

Operating expenditre

Development expenditure (RHS)

SOURCES: BNM, CIMB RESEARCH

SOURCES: BNM, CIMB RESEARCH

ECONOMIC UPDATE
May 24, 2012

Federal government debt rose to RM470.8bn or 51.3% of GDP in 1Q12 (RM456.1bn or 51.8% of GDP in 2011). Domestic debt made up 96.4% of total debt to amount RM453.9bn as at end-Mar 2012. Malaysias total outstanding external debt stood at RM249.5bn or US$80.5bn or 27.8% of GNI as at end-Mar 2012 (RM257.4bn or US$80.4bn or 30% of GNI as at end-Dec 2011). Short-term external debt declined 2.9% to RM100.9bn (RM103.9bn at end-2011) while medium-and-long-term external debt dropped 3.2% to RM148.6bn at end-Mar (RM153.5bn at end-2011).
Figure 15: Public debt stood at RM470.8bn (51.3% of GDP) as at end-Mar 2012
RM bn
500

Figure 16: Malaysias external debt declined to RM249.5bn (US$80.5bn) as at end-Mar 2012
RM bn
275

% of GDP
60

% of GDP

Title: Source:

70

250 400 50 225 300 40 200 175 150 100 20 125 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1Q12 10 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1Q12

60

Please fill in the values above to have them entered in your rep 50
40 30 20 10 0

200

30

Domestic debt

External debt

% of GDP (RHS)

External debt

% of GDP (RHS)

SOURCES: BNM, CIMB RESEARCH

SOURCES: BNM, CIMB RESEARCH

Shaky external conditions cloud 2H12 outlook

While domestic drivers continue to steady the ship, we remain wary about the vulnerable global economy given the high degree of uncertainty about how the euro area crisis will play out. If conditions in the eurozone deteriorate more rapidly than expected, there could be sharper declines in global asset markets and risk appetite. The fallout would dampen domestic consumer and business sentiments in Malaysia. As such, we are keeping our GDP growth estimate of 3.8% this year for now, allowing us to assess the still-shaky external conditions.
Figure 17: The OECD CLIs point to moderate global recovery
Index
105 % mom 1.0

Figure 18: Still-sluggish global trade and industrial output

% yoy
30

Title: Source:

20 100 0.5 10
95 0.0

Please fill in the values above to have them entered in your rep

0 90 -0.5 -10

85

-1.0

-20 Jan-01 May-02 Sep-03 Jan-05 May-06 Sep-07 Jan-09 May-10 Sep-11

Jan-00 May-01 Sep-02 Jan-04 May-05 Sep-06 Jan-08 May-09 Sep-10 Jan-12

% mom (RHS)

OECD CLI

US

Euro area

Japan

Global trade

World production index

SOURCES: OECD, CIMB RESEARCH

SOURCES: CPB, CIMB RESEARCH

ECONOMIC UPDATE
May 24, 2012

Figure 19: Export-oriented industries are expected to remain weak

% yoy 45

Figure 20: Wholesale and retail sectors are on weak momentum

% yoy
60 Index

Index
104

Title: Source:

160

30

102

45

120

Please fill in the values above to have them entered in your rep
15 100 30
0 98

80

15 -15 96 0

40

-30

94

-45

92

-15 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12

-40

Jan-00 May-01 Sep-02 Jan-04 May-05 Sep-06 Jan-08 May-09 Sep-10 Jan-12

Exports

Manufacturing output

OECD CLI (RHS)

Retail trade index (RHS)

Wholesale sales

Retail sales

SOURCES: OECD, DOS, CIMB RESEARCH

SOURCES: CEIC, CIMB RESEARCH

Figure 21: GDP forecast

Demand side Real GDP Private consumption Public consumption Private investment Public investment Exports Imports -------------------% yoy --------------------- ---------------% share -------------------- ----------------% pt cont. ------------ 2011 1Q11 2Q11 3Q11 4Q11 1Q12 2012E 2011 1Q11 2Q11 3Q11 4Q11 1Q12 2012E 2011 1Q11 2Q11 3Q11 4Q11 1Q12 2012E 5.1 7.1 16.1 12.2 -0.3 4.2 6.2 5.1 6.9 11.1 24.9 -8.2 1.9 9.3 4.3 6.6 6.0 2.7 4.6 4.0 5.7 7.6 21.1 5.4 4.8 3.9 5.2 7.3 22.9 18.8 1.9 5.5 7.8 4.7 7.4 5.9 19.8 10.3 2.8 6.8 3.8 6.3 4.1 10.0 3.4 5.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 49.8 13.2 23.5 49.6 11.0 22.5 48.9 11.4 23.9 50.9 12.3 23.0 49.7 18.1 24.5 50.8 11.1 25.0 51.0 13.3 24.9 100.2 89.3 5.1 3.5 1.9 1.5 4.3 5.4 5.1 3.4 1.2 2.1 1.9 7.7 4.3 3.2 0.7 0.7 4.6 3.5 5.7 3.8 2.3 1.2 4.8 3.5 5.2 3.6 3.5 2.0 5.5 6.8 4.7 3.7 0.6 3.6 2.8 5.9 3.8 3.1 0.5 2.3 3.4 5.2

100.6 100.8 101.2 100.4 100.1 99.0 87.5 86.2 87.6 86.9 89.4 87.9

Supply side Real GDP Agriculture Mining Construction Manufacturing Services

-------------------% yoy --------------------- ---------------% share -------------------- ----------------% pt cont. ------------ 2011 1Q11 2Q11 3Q11 4Q11 1Q12 2012E 2011 1Q11 2Q11 3Q11 4Q11 1Q12 2012E 2011 1Q11 2Q11 3Q11 4Q11 1Q12 2012E 5.1 5.9 -5.7 4.6 4.7 7.0 5.1 -0.2 -3.9 5.1 5.7 7.1 4.3 7.7 -9.3 1.8 2.6 7.1 5.7 8.8 -5.9 4.0 5.4 7.1 5.2 6.9 -3.8 7.5 5.2 6.6 4.7 2.1 0.3 15.5 4.2 5.0 3.8 2.5 1.0 11.4 2.5 4.8 100.0 100.0 100.0 100.0 100.0 100.0 100.0 7.7 8.8 3.0 25.1 54.2 7.1 9.8 2.9 25.4 53.8 7.7 8.5 2.9 25.3 54.1 8.4 8.4 3.1 25.1 53.8 7.4 8.5 3.1 24.8 55.0 6.9 9.4 3.2 25.3 54.0 7.6 8.6 3.2 24.8 54.7 5.1 0.4 -0.6 0.1 1.2 3.7 5.1 0.0 -0.4 0.1 1.4 3.7 4.3 0.6 -0.9 0.05 0.7 3.8 5.7 0.7 -0.6 0.1 1.4 3.8 5.2 0.5 -0.4 0.2 1.3 3.6 4.7 0.1 0.03 0.4 1.1 2.7 3.8 0.2 0.1 0.3 0.6 2.6

SOURCES: DOS, BNM, CIMB RESEARCH

BNM will stick to a wait-and-see approach

We believe Bank Negara Malaysia will maintain its accommodative monetary policy for an extended period on the back of continued caution on the external environment. The global economy remains highly vulnerable and the euro area debt crisis could escalate with severe implications for Asia. Malaysias exports and its domestic economy would be threatened. The domestic stockmarket would be affected by renewed stress in asset markets and a decline in global risk appetite. As such, we maintain our overnight policy rate target of 3% this year.

ECONOMIC UPDATE
May 24, 2012

DISCLAIMER
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. By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound by the limitations contained herein (including the Restrictions on Distributions set out below). Any failure to comply with these limitations may constitute a violation of law. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. CIMB, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CIMB, its affiliates and its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. The views expressed in this report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request. The term CIMB shall denote where applicable the relevant entity distributing the report in that particular jurisdiction where mentioned specifically below shall be a CIMB Group Sdn Bhds affiliates, subsidiaries and related companies. The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report and accordingly, neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof. This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof. Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors. Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Research Pte. Ltd. (CIMBR) and CIMBR notifies each recipient and each recipient acknowledges that CIMBR is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cwlth) in respect of financial services provided to the recipient. CIMBR is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. This research is only available in Australia to persons who are wholesale clients (within the meaning of the Corporations Act 2001 (Cwlth)) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. This research has been prepared without taking into account the objectives, financial situation or needs of the individual recipient. France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument. Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities (HK) Limited (CHK) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CIMB Securities (HK) Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CHK. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CHK. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong). Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (CIMBI). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations. Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (CIMB). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. Singapore: This report is issued and distributed by CIMB Research Pte Ltd (CIMBR). Recipients of this report are to contact CIMBR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to
8

ECONOMIC UPDATE
May 24, 2012

any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden. Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China. Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBS. United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom: This report is being distributed by CIMB Securities (UK) Limited only to, and is directed at selected persons on the basis that those persons are (a) persons falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the Order) who have professional experience in investments of this type or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order, (all such persons together being referred to as relevant persons). A high net worth entity includes a body corporate which has (or is a member of a group which has) a called-up share capital or net assets of not less than (a) if it has (or is a subsidiary of an undertaking which has) more than 20 members, 500,000, (b) otherwise, 5 million, the trustee of a high value trust or an unincorporated association or partnership with assets of no less than 5 million. Directors, officers and employees of such entities are also included provided their responsibilities regarding those entities involve engaging in investment activity. Persons who do not have professional experience relating to investments should not rely on this document. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd solely to persons who qualify as "Major U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors and investment professionals whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not an Institutional Investor must not rely on this communication. However, the delivery of this research report to any person in the United States of America shall not be deemed a recommendation to effect any transactions in the securities discussed herein or an endorsement of any opinion expressed herein. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)