OREANDA-NEWS. May 26, 2015. Supported by domestic demand, Malaysia’s economy expanded 5.6% year-on-year in 1Q 2015. On a quarterly basis, real GDP grew 1.2% in the first quarter versus 1.8% in 4Q 2014, slightly above the consensus estimate of 5.5%.

“Despite uncertainties in the global economy, we managed to perform better than others in terms of economic growth, led by domestic demand and supported by strong private consumption and investments,” Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah told a press conference on 16 May.

Husni pointed out that Malaysia’s GDP growth was higher than most Asean countries, including Singapore (2.1%), Indonesia (4.7%), South Korea (2.4%), the US (3%), the UK (2.4%), and Germany (1.1%).

Another plus factor for Malaysia is the recent strength of the ringgit. The ringgit fell sharply in the last quarter of 2014 as falling crude prices damaged government finances and dented investor confidence. Since March, it has appreciated 2.78% against the US dollar amid a rebound in oil.

Source: Bloomberg

11th Malaysia Plan: GDP to Grow to 2.6 Trillion Ringgit in 2030

More than 40% of Malaysia’s total employment will consist of skilled workers, compared with approximately 35% in 2020, according to a vision laid out by the Economic Planning Unit of the Prime Minister’s Department in the 11th Malaysia Plan.

The government targets the economy to grow 5%-6% during the five-year period of the 11th Malaysia Plan, based on sustained domestic demand and increasing contribution from the external sector. According to projections, the economy will expand to 2.6 trillion ringgit in 2030.

More importantly, the Federal Government will balance its fiscal position by 2020 by strengthening the tax base and improving the decision-making processes of development allocation for proposed projects. The fiscal deficit will be reduced from 3.2% to 0.6% by 2020.

Productivity gains are also emphasised to ensure sustainable and inclusive growth. Innovation will be a key growth driver over the next five years, while domestic consumption will be boosted by government efforts to lift income levels for the bottom 40% of household income groups.

No Rate-Cut Party

Bank Negara left its key rate unchanged at 3.25% at its policy meeting on 7 May. With economic growth cruising at above 5%, most analysts did not expect a rate cut.

Malaysian central bank Governor Zeti Akhtar Aziz confirmed the assessment in an interview earlier where she spoke of little need for an interest-rate cut in the near term, save for the threat of a “fundamental” downturn in the economy.

“We are on a steady growth path, and if there was a fundamental economic slowdown, the risk to that going forward, on the horizon, then it would prompt a downward adjustment,” she added.

MSCI Malaysia IndexSM

The MSCI Malaysia indexSM has a free float capitalisation of US\\$143 billion and comprises 42 stocks listed on the Malaysian Exchange.  The top 10 stocks of the MSCI Malaysia Index have a weighting of 57% in the index.

A rebalancing will take place on 29 May that will see Westports Holdings deleted from and UEM Sunrise added to the MSCI Malaysia indexSM.

Constituents of MSCI Malaysia IndexSM can be found at the MSCI website here.

Top Ten Components of MSCI Malaysia IndexSM

Name % Weightage % ROE
Public Bank Bhd 10.34 19.28
Tenaga Nasional Bhd 9.41 17.93
Malayan Banking Bhd 8.55 13.57
CIMB Group Holdings Bhd 5.88 7.08
Sime Darby Bhd 5.38 11.02
DiGi.Com Bhd 4.02 335.44
Genting Bhd 3.63 6.32
Petronas Chemicals Group Bhd 3.44 10.47
Axiata Group Bhd 3.35 10.73
Petronas Gas Bhd 3.02 17.53

Source: Bloomberg

SGX MSCI Malaysia Index Futures

Based on the MSCI Malaysia IndexSM, the SGX MSCI Malaysia Index Futures offers exposure to the top companies in Malaysia such as Public Bank, Malayan Banking and Petronas Gas. The SGX MSCI Malaysia Index Futures is denominated in US dollars and has a notional contract value of approximately US\\$12,000.  The minimum price fluctuation is 0.25 index point (with an equivalent value of US\\$5).  Trading hours are 8.30 am to 5.30pm, with a T+1 session from 6.30pm to 2.00am the next day.  Its close correlation with FTSE Bursa Malaysia KLCI index and other regional indices allows for pair trading or arbitraging between the indices and the futures contract.

Name FTSE Bursa Malaysia Kuala Lumpur Composite Index MSCI Malaysia Index
SGX MSCI Malaysia Index Futures 0.985 0.986