Our comprehensive assessment of Malaysia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Malaysia, as well as the latest industry developments that could impact Malaysia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Malaysia before your competitors.

Country Risk

Malaysia Country Risk

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Core Views

  • Malaysia's once-bloated current account surplus is coming under pressure from a combination of income account outflows and a dwindling trade surplus. We expect the narrowing of the surplus to continue, forecasting it to come in at 2.5% of GDP in 2014 and 1.6% in 2015. However, the risks are weighted to the downside, with the emergence of a current account deficit over the next few years increasingly likely.

  • Over recent years Malaysia's fiscal accounts have exhibited some worrying trends, with spending rising as a share of GDP, subsidy spending rising as a share of total spending, and indirect tax revenues declining. Going forward we are optimistic that these trends will be halted as subsidy spending is reduced and a Goods & Services Tax (GST) is implemented, which should help stabilise Malaysia's debt metrics and support private sector real GDP growth....

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Malaysia Operational Risk Coverage (9)

Malaysia Operational Risk

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Malaysia's labour force is characterised by a large, healthy and urbanised population, with reasonably good basic skills as well as a large number of specialised graduates. We note the domestic labour market therefore provides a wide variety of options for businesses. The workforce is also relatively unregulated, and trade unions have minimal influence. Nevertheless, BMI emphasises that the poor quality of education, combined with tough restrictions on the recruitment of foreign labour, means business will most likely have to provide extra training for local workers. Malaysia is ranked highly in the Asia region in terms of Labour Market Risk, in eighth place with a score of 62.5 out of 100.

The Malaysian labour market benefits from a high number of adults who have completed secondary and tertiary education, which means there are greater options for businesses looking to recruit skilled labour. The government is also...

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Malaysia Crime & Security

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BMI considers Malaysia to be one of the safest countries in Asia for foreign workers and businesses, with lower crime rates, fewer threats from terrorism, and less of a risk of interstate conflict than in most other emerging market countries in the region. In particular, we highlight that Malaysia has a markedly lower impact from terrorist activity than most of its neighbours, including Thailand, Indonesia, and the Philippines, while its involvement in the South China Sea disputes has been less confrontational than Vietnam and China. Malaysia is therefore ranked highly overall in the BMI Crime and Security Risks Index, in tenth place out of 29 countries in Asia, with a score of 61.8 out of 100. BMI notes that the main risks to foreigners come from petty crimes and scams, and the potential spreading of terrorist activity over the borders from neighbouring states.

Malaysia'...

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Malaysia Labour Market

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Malaysia's labour force is characterised by a large, healthy, and urbanised population, with reasonably good basic skills, as well as a large number of specialised graduates. We note the domestic labour market therefore provides a wide variety of options for businesses. The workforce is also relatively unregulated and trade unions have minimal influence. Nevertheless, BMI emphasises that the poor quality of education, combined with tough restrictions on the recruitment of foreign labour, means business will most likely have to provide extra training for local workers. Malaysia is ranked highly in the Asia region in terms of Labour Market Risks, in ninth place out of 29 countries, with a score of 60.2 out of 100.

The lack of labour market regulations, combined with laws which restrict the activities of trade unions, have led to greater flexibility for businesses in Malaysia with regard to their workforce. Although the...

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Malaysia Logistics

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Malaysia's logistics network is one of the most efficient and well developed in the world, which is a significant advantage for supply chains and businesses operating in the country. Malaysia's geographic location on a key international shipping route has enabled it to develop an integral role in the global supply chain, with high-quality port infrastructure and well-developed road, rail and air connections both internally and to neighbouring countries. Additionally, the use of Malaysia as a direct port of call for international shipping companies means that the costs of trading are reduced, while the development of modern and efficient trade procedures has lowered the burden of bureaucracy. The country has also been able to establish a widespread utilities infrastructure, and subsidies keep the cost of fuel, electricity and water low. As a result of these factors, Malaysia scores high in the BMI Logistics Risks Index, with 82.4 out of 100,...

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Malaysia Trade & Investment

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BMI considers Malaysia to be ranked among the most attractive countries in the Asia region as a location for investment and doing business. The government adopts a generally welcoming attitude towards foreign direct investment (FDI), and has established policies which have lowered the burden of bureaucracy, protected ICT activity and intellectual property (IP), and generally created a healthy business environment. Malaysia is therefore ranked highly in the Asia region in the BMI Trade and Investment Market Risks Index, in fifth place of out 29 countries, just behind Australia and ahead of Taiwan. It's high score of 73.1 out of 100 in this regard also places it favourably on a global scale, in 23 rd place out of 170 countries, and ranked above all the BRICS states (Brazil, Russia, India, China, and South Africa), which are currently seen as the most attractive emerging markets.

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Malaysia Industry Coverage (23)

Agribusiness

Malaysia Agribusiness

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BMI View: Strong growth prospects, opportunities for increased exports and government support will be the key factors driving growth in the Malaysian agribusiness sector. We see conditions being particularly favourable for sugar, poultry and cocoa production on the back of strong investment. However, we highlight that changing consumption patterns, disease outbreaks, sudden change s in policy and resource shortages could dent growth potential in the sector in the medium and longer term.

Key Forecasts

  • P alm oil production growth to 2017/18: 11.0% to 21.5mn tonnes. Growth will be supported as companies replant mature estates and yields improve on the back of better technology.

  • ...

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Autos

Malaysia Autos

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According to the Malaysian Auto Association (MAA), auto production grew 5.6% in 2013, to 601,407 units. While passenger car production registered healthy growth of 6.7%, to 543,892 units, output in the commercial vehicle (CV) segment contracted 4.1%, to 57,515 units. For 2014, we expect growth in both CV and passenger car production, and forecast overall auto production growth to come in at 4.9%, to 630,590 units.

Auto sales in June 2014 grew 9.2% year-on-year (y-o-y) to 58,561 units, bringing sales for H114 to 333,142 units, an increase of 6.3% y-o-y.

We are maintaining our 2014 passenger car sales growth forecast of 4.0%, to 600,000 units, as high base effects will temper growth in H214.

Slowdown In Construction To Weigh On CV Segment

The weakness in CV sales has been more pronounced than we envisaged. Sales in the segment declined 3.0% y-o-y over...

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Commercial Banking

Malaysia Commercial Banking

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...
Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Malaysia Consumer Electronics

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BMI View: Rising incomes and declining device prices in key categories have catalysed storng growth in the Malaysian consumer electronics market. Sales of key digital lifestyle products such as digital TV sets, smartphones and tablets are growing rapidly in Malaysia, and the country remains one of the region's high-growth consumer electronics markets. We expect this trend will remain in place over the medium term, particularly with increasing competition in the smartphone, tablet and flat-screen TV markets from Chinese vendors. However, there is downside risk due to uncertainties over the export market, while the outlook for employment could weigh on consumer confidence and limit spending on discretionary lifestyle products such as TV sets.

Headline Expenditure Projections...

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Defence & Security

Malaysia Defence & Security

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BMI View:   As Malaysia enters a new financial year, we expect to see an upward trend in military and defence procurement. 2014 saw very little activity in the defence sector as the government reviewed its defence procurement strategy. The release of a new five year development plan and a review of Malaysia's defence offsetting programme could yield changes for the indigenous defence sector in 2015. However, we forecast a marginal rise in defence spending, which remains a low priority for the government which is trying to address a budget deficit. Meanwhile, Malaysia enjoys peace and stability with regards to internal and external security threats. Key concerns include continued incursions by Filipino groups and rising piracy in regional waters.

...

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Food & Drink

Malaysia Food & Drink

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The Malaysian economy's strong real GDP growth during 2014, which we forecast reaching 4.4% for the full-year, was driven by strong exports and increased domestic consumption. Proposed changes to the country's fuel subsidy scheme and the introduction in April 2015 of a 6% goods and services tax (GST) are likely to produce a slowdown in domestic consumption. However, these changes will have a positive impact on long-term fiscal discipline by reducing expenditure and increasing government revenue. BMI maintains its view that, across the forecast period, inflation should remain manageable and continued strong real GDP growth is to be expected.

Headline Industry Data

  • 2014 total food consumption sales growth (local currency): +3.0%; compound annual growth rate (CAGR) 2013-2018: +3.1%.

  • 2014 per capita food consumption sales growth (...

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Freight Transport

Malaysia Freight Transport

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Good Freight Outlook For 2015

Activity levels across Malaysia's different freight modes will grow moderately-to-strongly in 2015, generally picking up pace compared to our estimated levels for 2014. As infrastructure investment plans are advancing, Malaysia will be gradually expanding its freight capacity to match. Airfreight, potentially affected by the crisis felt by  Malaysia Airlines, will nevertheless notch up growth in the low single digits, while railfreight will do a little better. In shipping, gross tonnage and container volume growth will pick up as both exports and imports continue to grow, despite a slight easing of domestic consumption.

The Malaysian economy surged ahead in 2014, driven by strong export demand and dynamic domestic consumption. Although we remain positive in our outlook for 2015, we believe one of those two engines of expansion - the domestic...

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Information Technology

Malaysia Information Technology

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BMI View: The Malaysian IT market has a bright medium term outlook, due to a supportive economic environment and a government policy framework encouraging the development of the market . In the hardware market , strong growth in tablet s ales and a boost to traditional form factor sales from XP support withdrawal and cuts to Windows licensing fees will boost consumer and eEnterprise spending. Meanwhile, over the medium term vendor innovation based on Intel 's Haswell chips and...

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Infrastructure

Malaysia Infrastructure

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BMI View: As expected the rebound in construction and infrastructure growth in Q114 was not sustained in Q214 and we continue to expect near-term construction and infrastructure growth to moderate from levels seen in 2013. This outlook is due to three factors: fiscal concerns that present financing risks for public-funded projects, waning investment from the private sector and a deflated project backlog.

Key Trends And Developments

  • In May 2014, Kumpulan Europlus (KEB) announced that a consortium consisting of IJM and KEB was appointed by the government as the main EPC contractor for the MYR5.04bn West Coast Expressway (WCE) project. The project has 11 packages and IJM has been selected to complete Sections 3, 4, 5, 8 and 9 of the 233km WCE...

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Insurance

Malaysia Insurance

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BMI View: Recent news flow from both the regulator and insurance companies themselves confirm our view that the Malaysian insurance sector is a strong, stable and dynamic industr y. The recent premium growth in the non-life sector has been predicated on a improving domestic economy and increased auto sales however with the introduction of greater product innovation it has the potential to grow premiums(Y-O-Y) further over the forecast period. While the life insurance has not had a comparatively successful year changes in regulation auger well for the long term prospects of the sector....

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Medical Devices

Malaysia Medical Devices

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Espicom Industry View: Malaysia's strategy of introducing business friendly policies and not least a new set of medical device regulations has seen it continue to attract multinational investment in manufacturing plants in the country. Whilst there has been some change, most local manufacturers tend to specialise in the manufacture of rubber-based consumables, which has resulted in a high reliance on imports. This being a factor, alongside continued investments in healthcare, the medical device market is set to expand at a solid 16.1 % per annum.

Headline Industry Forecasts

  • In US dollar terms, the medical device market is projected to expand by a CAGR of 16.1%, which should see it rise from an...

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Metals

Malaysia Metals

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BMI View:   Malaysia's has one of the most developed metals industries in the Asia-Pacific region, however, the industry has found itself increasingly challenged by the pricing strategies of other regional producers which have increasingly started to affect companies profit margins. 

The Q4 2014 Malaysia Metals Report analyses developments with the country's steel and tin sectors as well as the strategies being undertaken by companies as they face into an increasingly challenging operating environment. H2 2014 will see Malaysia's status as a leading steel producer come under threat as output growth is set to fall from 8.1% year-on-year (y-o-y) in 2013, to 5.4% this year. The increasing threat posed by Chinese exporters, who have been able to lower prices on a number of products both on the domestic market as well as internationally, is starting to cut into the operating...

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Mining

Malaysia Mining

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BMI View: Despite significant deposits of untapped minerals and positive reforms by the Malaysian government in recent years, Malaysia's mining sector is unlikely to witness a resource boom over our forecast period to 2018. Depleting reserves and falling ore grades will continue to impede growth in the tin sector, while falling gold prices remove the shine off investment in the gold mining industry.

We forecast Malaysia's mining industry to reach USD41.2bn by 2018, increasing at a clip of 5.0% per annum. Despite significant deposits of untapped minerals and positive reforms by the Malaysian government in recent years, a resource boom is unlikely to catch up with the country anytime soon. In contrast to the relentless pursuit of volume growth over the past decade, mining firms are focusing on the development of their core brownfield assets on the back of the economic...

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Oil & Gas

Malaysia Oil & Gas

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BMI View : Malaysia is a stable oil and gas producer. Over the next ten-years, it will see larger growth in gas production than in crude oil, though EOR and new deepwater projects will help to support crude oil output. Although RAPID will see an expansion in Malaysia's downstream production, we note that it faces fierce competition from its regional peers. 

Headline Forecasts (Malaysia 2012-2018)
  2012e 2013e 2014f 2015f ...

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Petrochemicals

Malaysia Petrochemicals

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Investment in Malaysia's petrochemical industry is being jeopardised by rising costs and a decline in competitiveness as the country faces a surge in US petrochemicals capacity, utilising ethane derived from shale gas. BMI's Malaysia Petrochemicals Report examines the latest project developments as well as market trends which point to the pattern of demand over the medium-term.

In 2013 Malaysian petrochemicals capacities remained unchanged from the previous year. In the olefins segment, the country had capacities of 1.74mn tpa ethylene, 1.13mn tpa propylene and 100,000tpa butadiene. Intermediate petrochemicals production capacities include 240,000tpa styrene, 440,000tpa vinyl chloride monomer, 550,000tpa xylenes and 380,000/385,000tpa EG/EO respectively. In the polymers segment, there was 975,000tpa PE (120,000tpa HDPE, 475,00tpa LDPE and 380,000tpa LLDPE), 560,000tpa PP, 260,000tpa PVC, 215,000tpa PET and 140,000tpa PS. In the fertiliser...

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Pharmaceuticals & Healthcare

Malaysia Pharmaceuticals & Healthcare

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BMI View: The Malaysian pharmaceutical and healthcare markets are set to grow significantly. Promising long-term economic growth, local government support, an   ageing population and a   surge of chronic non-communicable diseases , sector growth will continue to be driven . However, a slowdown in economic growth in 2014, coupled with the fact that investment in the pharmaceuticals sector will take longer than expected to bring returns, present downside risks to our outlook.

Headline Expenditure Projections

  • Pharmaceuticals: MYR6.60bn (USD2.10bn) in 2013 to MYR7.51bn (USD2.35bn) in...

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Power

Malaysia Power

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BMI View :   The Malaysian power sector is set to grow at a slower rate in 2015 than in preceding years as we expect no thermal projects to be completed in that year. However, we expect sector growth to accelerate after 2015 as most of the major thermal projects being developed in Malaysia for completion after 2015 are on schedule.

We forecast electricity generation in Malaysia to grow by 1.9% in 2015. This growth rate marks a significant slowdown from previous years, with the five-year historical average growth for power generation at around 8.0%, according to our estimates. We do not expect the slowdown in 2015 to continue in 2016 and over the long term. We have maintained our long-term forecasts for electricity generation in Malaysia this quarter as the major projects we have incorporated into our forecasts after 2015 remain on schedule. We forecast electricity...

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Real Estate

Malaysia Real Estate

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BMI View : The outlook for Malaysia's commercial real estate sector has been somewhat clouded over recent months, which has been due to a slowing economy and export sector as a result of China's economic slowdown. However, with signs that the economy is back on track as external demand picks up, we remain confident that demand will continue to grow across the commercial real estate market into 2015.

The Malaysian commercial real estate market has become a focal point for international investors in recent years as developers look to take advantage of the country's fast-growing and increasingly affluent population and growing levels of demand from both the private and public sectors. In particular, the market has seen an inflow of foreign direct investment (FDI) from neighbouring Asian states, including Singapore and China.

However, H213 saw a shift...

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Retail

Malaysia Retail

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BMI View:   We have upgraded our full-year GDP forecast for Malaysia from the previous 4.5% to 5.8% on the back of increased domestic consumption, which bodes well for the continuing health of the retail market - particularly areas such as furnishing & home. However, the retail market is expected to temporarily soften with the implementation of the Goods and Services Tax on April 1.

Our Malaysia retail report provides a comprehensive forecast of various retail indicators including household spending and headline total spending across each retail subsector; household income and employment forecasts; demographic forecasts; and a detailed breakdown of household and per capita spending across a large number of retail areas, including food & drink, clothing & footwear, household goods, and a number of other subsectors.

Hypermarkets,...

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Shipping

Malaysia Shipping

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Strong Growth Rate Set To Ease In 2015

Activity levels at Malaysia's main ports will grow moderately in 2015, on the back of continuing economic expansion and a good trade performance. Gross tonnage and container volume growth will pick up as both exports and imports continue to grow, despite a slight easing of domestic consumption. Port Klang and Port Tanjung Pelepas will also benefit from expansion projects and developments over the last two years. Tonnage growth at both will lag slightly behind GDP, with box traffic growth leading GDP and, in the case of Port Klang, exceeding 7%.

The Malaysian economy surged ahead in 2014, driven forward by strong export demand and dynamic domestic consumption. Although we remain positive in our outlook for 2015, we believe one of those two engines of expansion - the domestic consumer market - is going to lose some of its vigour. GDP grew by 6.2% in Q114 and...

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Telecommunications

Malaysia Telecommunications

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Although the mobile penetration in Malaysia is high, BMI believes that there is still scope for growth. Strong competition between the operators on the telecommunications sector will erode ARPU, but value-added product offerings, such as data heavy bundles, will add buoyancy. Wireless and wireline non-voice services account for an increasingly large proportion of operators' revenues, and this is encouraging them to reinvest heavily in next-generation infrastructure, including fibre-to-the-home and 4G LTE.   However, unlike at other relatively mature market, operators such as Digi , have managed to increase their subscriber base by bundling their data offers in with prepaid SIM-cards.

...

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Tourism

Malaysia Tourism

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BMI sees a very bright future for Malaysia's tourism market, with growth expected across all key indicators including inbound arrivals and outbound departures throughout the forecast period to 2018. As the number of tourists increases, we will see healthy growth in tourism-related expenditure and industry value, providing a boost to the hotel industry and creating a very positive potential investment environment.

Arrivals to Malaysia are dominated by countries within the Asia Pacific region owing to the multitude of travel connections including air, road, rail and sea travel and the relative affordability of regional travel. Many countries within this region, such as key source markets including China and Singapore, are experiencing healthy domestic economic growth, leading to increased private financial consumption. In line with this, we are forecasting healthy growth in the number of visitors to Malaysia. Arrivals...

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Water

Malaysia Water

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B MI View : In an effort to force operators to focus on minimising wastage and improving efficiency, an asset holding company was established to acquire state operator s ' assets and liabilities. Whil e this is a work in progress, the regulatory sector still remains opaque and disjointed, acting as a significant deterrent to private sector players. W e have an overall positive view for the Malaysian w ater sector ,   however the government budget , with   declining federal...

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