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Malaysia’s May exports slump
Malaysia’s exports slumped 29.7% in May from a year earlier, steeper than the 26.3% y-o-y decline in April, as the value of key export commodities fell and demand for electronics remained weak. A preliminary release from the Statistics Department last Friday showed exports to Asean countries, at RM11.59 billion or 27% of total exports in May, plunged 26% from a year ago due to lower exports of crude petroleum, electrical and electronic (E&E) products as well as refined petroleum products. Lower demand for E&E products caused exports to the US to plunge 37% to RM4.94 billion from RM7.85 billion in May 2008. E&E exports to the US fell 39.8% y-o-y but were up 7.7% from April.

Exports to China dipped 27.7% to RM4.95 billion in May from RM6.85 billion a year ago on lower demand for E&E products, palm oil, chemicals and chemical products as well as crude rubber. Some 51.1% of total exports in May went to Singapore, China, the US, Japan and Thailand. Meanwhile, imports fell 27.8% in May to RM32.93 billion from a year ago, due mainly to the decline in imports of intermediate goods, the Statistics Department said.

On a m-o-m basis, exports rose 4.5% to RM42.95 billion in May from April, while imports fell 2.3% to RM32.93 billion, bringing trade surplus to RM10.02 billion for the month. A RM50.12 billion trade surplus was recorded for the first five months of 2009, as exports fell 23.5% to RM205.45 billion, while imports contracted 27.4% to RM155.33 billion. Total trade for the same period was worth RM360.78 billion, a 25.3% decrease from a year ago.

China to allow yuan trade payments

China has taken another step towards internationalising its currency with the announcement of new rules to allow selected companies to invoice and settle trade transactions in yuan. The regulations released on July 2 by the People’s Bank of China, will allow selected companies to settle trade transactions through financial institutions in Shanghai and other cities in southern China.

Offshore, the trial scheme will allow transactions to be settled in RMB in Hong Kong and Macau, and later in a limited fashion in Southeast Asia. Importers and exporters will thus be able to place their orders with approved Chinese companies, and settle payment for them, in RMB. To expand the RMB’s usage, China agreed to provide a total of RMB650 billion (RM330 billion) to Argentina, Belarus, Hong Kong, Indonesia, Malaysia and South Korea through so-called currency swaps.

US unemployment higher in June
US unemployment rate for June rose to the highest in almost 26 years, contrary to expectations. The jobless rate rose to 9.5%, the highest since August 1983, from 9.4% in May and 5.5% a year ago. Payrolls declined by 467,000 last month following a 322,000 drop in May, according to US Labour Department figures released last Thursday. The sharper decline in job losses was due to higher retrenchment in the private sector, particularly construction, retail, leisure, hospitality and government sectors.

Government payrolls decreased by 52,000, the biggest decline since July 2007, after dropping 10,000 the previous month. Service industries subtracted 244,000 workers after falling 107,000. Similarly, non-farm job losses worsened to 467,000 in June, after narrowing for the fourth consecutive month to 322,000 in May. The economy lost about 6.5 million jobs since December 2007. Last Monday, the US Conference Board’s consumer confidence index fell in June to 49.3 from a downwardly revised 54.8 in May.

Bank Indonesia cuts rates
Indonesia’s central bank cut its key rate by 25 basis points to a record low of 6.75% last Friday and signalled that it was nearing the end of a rate-cutting cycle. “Looking forward, monetary policy will be conducted more cautiously given that room for monetary easing is becoming more limited,” said Bank Indonesia, in a statement. It has cut the overnight policy rate by a total of 2.75 percentage point since December 2008. The central bank expects economic growth to reach the upper end of its 3% to 4% forecast range this year, cooling from 6.1% last year.


This article appeared in Corporate page of The Edge Malaysia, Issue 762, July 6-July 12, 2009

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