Malaysian economy? Always watch ‘Services’ and ‘Manufacturing’

I have written about this two or three times. It’s okay, let’s repeat one more time since this time it was announced during a Bank Negara Malaysia press conference by none other than the Bank Governor herself. She said, ‘domestic demand is anchor and driver of growth.’ Period. Without any doubt, the just announced 6% growth for 2014 did not come from the fluctuating oil price. It definitely did not come from the plantation sector because it was way below the 6%. However, the growth came from the following industries.
Services sector – expansion was seen across ALL sub-sectors
Manufacturing Sector – growth supported by export-oriented industries, especially the in the electrical and electronic clusters.
Mining Sector – This is up though oil prices decline. Higher crude oil production contributed to this because the production increased 13.6% year on year.
Agriculture – lower palm oil production with the floods.
Looking at the above, the reason why domestic demand remain strong was because the oil and gas industry made up just 1% of all employment. Meanwhile the services together with the manufacturing sectors accounted for 87% of the country’s employment. Please note these two sectors from now onwards, if they are down, we have better be careful.
Current positive fundamentals include low inflation, favourable employment conditions, low external debt and ample international reserves. Note that she also said that the drop in oil price has affected Malaysia without any doubt but for the past many years much effort has been put into diversifying the economy, the exports and even the revenue base of the government (GST coming too). This helped to push domestic demand to be a key driver of the economy. Note that domestic demand is one key reason why countries like Indonesia and Thailand has been growing continuously too.
Next she said something which I just told Ken of penangpropertytalk.com just over one week ago. I told him that with lower fuel prices, every car owner would have more money to spend. I do not think they will keep or save the money. Most probably it will go into buying new items. Thus perhaps we should buy some consumer related stocks. He laughed and agreed. Tan Sri Zeti said that moving forward, the domestic demand would sustain as the lower fuel prices would contribute to higher disposable income of around RM7.5 billion.
Nevertheless, total foreign direct investment (FDI) dropped slightly from RM8.2 billion in 2013 to RM35.1 billion in 2014. The FDI is no longer into the manufacturing but was instead into major economic sectors such as manufacturing, mining, services, financial, as well as wholesale and retail trade sub-sectors. Long time ago, majority of all FDIs were always into manufacturing.
A much more detailed reporting can be found as follows:
Weak Ringgit does not reflect fundamentals – TMI
Zeti dispels oil rout – The Star
Economic fundamentals remain strong – FMT
Yes, as at now I still think the economic growth is intact even if it will be slower than 2014. Yes, I am not one of those who sold more than bought. In fact I think some of you may have read my articles that my involvement with stocks has increased a lot beginning end 2014.  Yes, I promise not to be lazy and will start looking at secondary properties to buy after Chinese New Year. Hope I am right, as usual. Happy Holidays soon….
written on 15 Feb 2015
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