Malaysia's GDP At 3-Year High: ETFs In Focus

Malaysia’s Department of Statistics said that the country’s GDP grew 6.2% year over year in the third quarter of 2017 compared with 5.8% in the second quarter and 4.3% in the year-ago quarter. The Malaysian Ringgit increased after the data release.


Malaysia’s central bank, Bank Negara Malaysia, left its Overnight Policy Rate (“OPR”) unchanged at 3.00% in its latest policy meeting, as expected by a Bloomberg survey of 22 economists.


GDP Growth Drivers


In its latest policy meeting, the central bank hinted at changing its stance on monetary policy next year, as economic growth is gaining momentum. Consumer prices in Malaysia increased 4.3% year over year in September compared with 3.7% in August. Therefore, an interest rate hike might be expected in 2018 as the South East Asian economy has registered strong growth and seems to be gaining momentum.


GDP increased as domestic demand as well as exports registered strong growth. Exports grew 11.8% compared with 9.6% in the previous quarter. Moreover, private consumption increased 7.2% sequentially in the quarter.


Manufacturing sector activity grew 7% compared with 6% in the prior quarter. Moreover, service sector activity grew 6.6% compared with 6.3% in the prior quarter.


Gross fixed capital formation grew 6.7% in the quarter as public spending gained momentum. Public spending increased 4.1% year over year compared with a decline of 5% in the prior quarter. “I am particularly delighted that the gross fixed capital formation or investments growth remained steady at 6.7 per cent as private sector investments were sustained and government’s investments rebounded in this quarter,” Abdul Rahman Dahlan, minister in the prime minister's Department said.


Fed Pressure


Per the CME Fed Watch tool, there is a 91.5% chance of a 25 basis point rate hike and 8.5% chance of a 50 basis point rate hike in December. This is expected to weigh on investments in emerging economies and create pressure on various South East Asian economies to adopt a rate hike stance, in sync with the developed world.

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