MALAYSIAN PRICES UP UP UP - Inflation to 3-MONTH HIGH July 06; More EXPENSIVE FOOD, DRINKS & TRANSPORTATION –ALL Due HIKE in FUEL & ELECTRICITY Rates?
The Consumer Price Index (CPI) for January to July 2006 increased by 3.9 per cent confirmed the worst fears that inflation is soaring sky high. The biggest increase is noted in the transportation sector 12.6% (with the enormous hike in fuel prices). Food and non-alcoholic drinks up moderately at 3.5%. Housing, Electricity, Gas and other fuel by 1.5%.
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And here are the details as reported by Bernama
CPI Up 3.9 Per Cent Jan-July ;
to July 2006 increased by 3.9 per cent 103.1 compared with 99.2 in the same period last year.
The CPI in July 2006 was up 4.1 per cent to 104.0 compared with 99.9 in July last year. When compared with June 2006, the CPI, however, increased only slightly by 0.2 per cent.
Issuing details of the CPI for July 2006 here Wednesday, the Department of Statistics said the 3.9 per cent increase in the CPI was brought about by increases observed in the indices of all the main groups.
The exceptions were the Clothing & Footwear and Communication sectors, both of which decreased by 1.2 per cent and 1.3 per cent respectively.
Prices in the transportation sector noted significant increase, going up by 12.6 per cent, Food & Non-Alcoholic Beverages went up by 3.5 per cent, and Housing, Electricity, Gas & other fuels recorded a more moderate increase of 1.5 per cent.
The three main groups, Food & Non-Alcoholic Beverages, Housing, Water, Electricity, Gas & other fuels, and Transport together accounted for 88.5 per cent of the overall increase recorded for the current period, the department said.
The 3.5 per cent increase in the index for Food & Non-Alcoholic Beverages was the result of increases for Food At Home (+3.5 per cent), Food Away From Home (+3.8 per cent) and Coffee, Tea, Cocoa & Non-Alcoholic Beverages (+2.6 per cent).
Comparing the CPI of June and July 2006, increases were shown in eight main groups, namely Clothing & Footwear (+0.5 per cent), Food & Non-Alcoholic Beverages (+0.4 per cent), Health (+0.3 per cent), Restaurants & Hotels (+0.2 per cent), Recreational Services & Culture (+0.2 per cent), Education (+0.1 per cent), Alcoholic & Tobacco (+0.1 per cent) and Furnishing, Household Equipment & Routine Household Maintenance (+0.1 per cent).
Indices for Housing, Water, Electricity, Gas & Other Fuels and Transport remained unchanged at 101.7 and 112.3 respectively. A reclassification of items according to their durability and services rendered showed increases in Semi Durable Goods (+0.8 per cent), Services (+0.2 per cent) and Non-durable Goods (+0.2 per cent). The index for Durable Goods decreased by 0.3 per cent.
and report from biznewsdb.com/
Malaysia's Inflation Accelerates to Three-Month High(Update 1) Updated : 16-08-2006 Media : Bloomberg;Story By : Stephanie Phang
Aug. 16 (Bloomberg) -- Malaysia's inflation rate accelerated to a three-month high in July on costlier food, beverages and transportation, suggesting higher electricity rates have prompted companies to raise prices.
The consumer price index rose 4.1 percent from a year earlier, after gaining 3.9 percent in June, the Putrajaya-based Department of Statistics said in a statement today. That atched the median forecast in a Bloomberg News survey of 22 economists. Prices rose 0.2 percent from June.
``We expect inflationary pressure to persist for the rest of the year given the recent hike in petrol prices as well as power tariffs,'' said Wong Lai Yee, an economist at TA Securities Holdings Bhd. in Kuala Lumpur.
State utility Tenaga Nasional Bhd. won government approval to raise electricity tariffs in June for the first time in nine years, adding to rising prices which have caused
Gains in consumer prices reached a seven-year high of 4.8 percent in March after Abdullah raised retail gasoline and diesel prices by as much as 23 percent on Feb. 28. That allowed the government to trim fuel subsidies paid to oil companies to keep retail pump prices low as global crude prices surged.
Electricity Prices
The government allowed
The central bank expects inflation to average 3.5 percent to 4 percent this year, compared with 3 percent in 2005 and 1.4 percent in 2004.
Faster inflation may prompt the central bank to raise its benchmark interest rate this month, after holding steady for the last two policy meetings, said Joseph Tan, an economist at Standard Chartered Bank in
currently.
`Last
``I think August is the last opportunity to hike,'' said Tan. ``If they don't, they won't for the rest of the year. Growth in the remaining quarters of 2006 is also unlikely to exceed the first half, so raising interest rates later when growth is slowing will be awkward.''
Still, Governor Zeti Akhtar Aziz said on Aug. 14 that
`We are expecting the central bank to maintain the overnight policy rate at 3.5 percent for the rest of 2006,'' said TA's Wong. ``Domestic demand will soften in the second half, the U.S. Federal Reserve will maintain its Fed Funds rate at 5.25 percent, and the inflation rate has peaked.''
Governor Zeti in November raised borrowing costs for the first time since the Asian financial crisis of 1997-98, and announced another increases in February and April. The central bank left rates unchanged on May 22 and July 28.
`Trending Lower'
``I don't see any impact on monetary policy'' from July's higher inflation, said George Worthington, chief Asia-Pacific economist at Thomson IFR in
Price increases in July were led by a 12.3 percent jump in transport costs, after a 12.6 percent gain in June. For the first seven months of the year, transport prices rose 12.6 percent, accounting for half of the increase in the consumer price index during the period.
The cost of food and non-alcoholic beverages rose 3.8 percent in July, accelerating from a 3.2 percent gain in June. Food and beverage costs gained 3.5 percent in the first seven months, accounting for about 30 percent of the gain in consumer prices, according to today's report.
``Food and housing have been rising gradually and steadily,''
Prices of alcoholic beverages and tobacco increased 7 percent in July from a year earlier, and climbed 7 percent in the first seven months.
Alcohol, Tobacco
Cigarette makers including British American Tobacco Malaysia Bhd. and beer companies such as Carlsberg Brewery Malaysia Bhd. raised retail prices in October after the government increased tobacco and alcohol taxes for a third year in its Sept. 30 budget.
The cost of recreational and cultural services increased 1.1 percent, the fastest pace this year.
Housing, water, electricity, gas and other fuels gained 1.8 percent from a year earlier. Prices of clothing and footwear fell 1.1 percent in July from a year earlier, while communication costs dropped 1.5 percent.
Health-care costs increased 2.2 percent in July. Prices of furnishings, household equipment and household maintenance were 1.1 percent higher than a year earlier. Hotel and restaurant prices climbed 3.9 percent.
and from
www.biznewsdb.com/
Malaysia Will Allow Ringgit to Gain to Curb Inflation, UBS Says
Updated : 16-08-2006 Media : Bloomberg Story By : David Yong
Aug. 16 (Bloomberg) -- Malaysia will allow the ringgit to gain further this year to combat inflation now the central bank has stopped raising interest rates, according to UBS AG.
Bank Negara Malaysia's plan to maintain foreign exchange flexibility means it can use the currency to damp inflation, suggesting a shift in the preferred policy tool to the ringgit, according to a report yesterday from a team of UBS analysts including Nizam Idris. The central bank has kept rates on hold at its past two meetings after three increases since November.
``Having paused on interest-rate hikes, you wouldn't want your currency to weaken as well'' to guard against inflation, Nizam, a Singapore-based currency strategist at UBS, said in a telephone interview. ``You don't want to be on a clear monetary- easing stance in
The ringgit traded at 3.6815 per dollar as of 1:16 p.m. in Kuala Lumpur. The currency may advance to 3.65 in a month and 3.60 by mid-November, Nizam said. The ringgit has risen 2.7 percent this year, the smallest gain among the five Southeast Asian currencies tracked by Bloomberg.
Yuan Gains
Further gains in
In July, the yuan had its best month since the peg was scrapped as policy makers including Zhu Baoliang, chief economist at a research group linked to the main economic planning agency, called for a stronger currency to narrow a record trade surplus and control inflation.
Bank Negara will maintain a highly liberal foreign exchange regime to promote capital mobility, Governor Zeti Akhtar Aziz told reporters in
The central bank kept its overnight lending rate between banks at 3.5 percent on May 22 and July 28, saying inflation has peaked and risks to growth have emerged. Policy makers will probably keep the rate on hold again at their next meeting on Aug. 25, Nizam said.
``For
Inflation Accelerates
The government will probably say today inflation quickened to 4.1 percent in July from a year earlier due to higher electricity prices, according to a Bloomberg News survey. Consumer prices rose 3.9 percent in May and June, easing from a seven-year high of 4.8 percent in March.
The shift of
``Bank Negara has been one of the most interventionist central banks over the last year relative to the reserves since July 2005,'' he said. ``This is slowly changing and we have seen less aggressive dollar-buying so far this year.''
http://www.aliran.com/content/view/116/10/
Electricity tariff hike sparks concern ; Saturday, 05 August 2006
Egged on by investors, the government is allowing a tariff hike even though TNB and the IPPs are posting huge profits, says Ong Eu Soon.
When the public reacted with furore after the recent oil price hike, the government tried to assure the people that the oil price hike would not cause inflation.
The Prime Minister even pondered aloud, asking why there should be any price increases following the oil price hike: "I don't understand why prices of goods increase?" The government even pledged to go all out to curb inflationary pressures following the oil price hike.
Betting on the short memory of Malaysians, Energy, Water and Communications minister Dr Lim Keng Yaik announced on 24 May that the government will allow national power firm Tenaga Nasional Bhd to raise electricity tariffs from June 2006 - though small electricity consumers would not be affected..
Citing the spiralling cost of crude oil used to generate power as the reason for the tariff hike, Lim had earlier claimed that if the current tariffs were to be maintained, TNB would go bankrupt. The minister further noted that even with the new rates, the tariffs would still be among the lowest in the region.
Soaring profits
Is the tariff hike justified? It was reported that TNB's profit for 2005 was up 57 per cent, with the company earning RM1.28 billion, compared with RM813.7 million a year earlier. (Source: Reuters,
Judging from the persistent strengthening of the ringgit over the past six months, the ringgit is expected to further rise against the US dollar – in line with the overall weakening of the US dollar - over the next six months. With Bank Negara relaxing its grip on exchange management to tackle the inflationary impact from rising oil prices on the local economy, TNB stands to gain further from forex gains. A 1 per cent appreciation in the ringgit translates into a RM150 million gain for TNB. Of TNB's total debt of RM29.8 billion, RM13.7 billion or 46 per cent are foreign denominated debts (Source: StarBiz, May 6 2006).
The local currency has appreciated by around 5 per cent, which means TNB has gained a total of RM750 million. It is clear that the increase in the cost on fuel did not outweigh the forex gain. The issue of TNB going bankrupt if the present tariff rate is to be maintained is clearly unfounded, misleading and factually erroneous. In the words of
Lim Keng Yaik, the hike in fuel costs is just a mosquito bite for TNB.
Exorbitant IPP profits
If TNB is serious in boosting efficiency and productivity and in improving cost management, it should first target big power users with unpaid electricity bills, which run into more than a billion. It should reject outright the slipshod power purchase agreements with independent power producers (IPPs), which allow these IPPs to piggyback on TNB and rake in exorbitant profits to the detriment of TNB.
When news of a proposed tariff hike was first announced, research houses immediately reacted by upgrading TNB stock. Based on a forecast rate increase of 8 per cent for TNB, TA Securities upgraded TNB's 2006 earnings by 5.3 per cent and 19.8 per cent for 2007. The research house also raised its target price for the stock to RM10.50, based on 18.9 times the 2007 earnings per share of 55.6 sen for the financial year 2007. It maintains a 'buy" call on the stock.
According to CIMB Securities, every 1 per cent net increase in tariff rates would translate into an increase in earnings per share of 7-8 per cent (Source: Business Times, 6 May 2006). The buoyant mood among investors reveals to us how much TNB stands to gain from the tariff hike. This is a typical example of the indecent quest for profits and protectionism of big corporations with total disregard to the interest of the people.
Mismanagement
If the government is truly capable, it should promote the fact that our electricity tariffs are among the lowest in the region to foreign investors. It should tell investors who intend to invest or who have already invested in
competitive edge instead of constantly reminding Malaysians that we should pay more just because our tariffs are among the lowest.
passing on the cost of TNB's mismanagement and its erroneous policies to the
people. The decision to raise tariffs while TNB continues to chalk up sizeable profits is set to increase public discontent.
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posted by multidimid at 5:52 AM
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