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Jul 2017 18

Exports boost for economy

PETALING JAYA: Asean economies’ growth has so far been driven by exports recovery, with domestic demand factors including private consumption still patchy.Morgan Stanley Research economists said in a report that private...
PETALING JAYA: Asean economies’ growth has so far been driven by exports recovery, with domestic demand factors including private consumption still patchy.
Morgan Stanley Research economists said in a report that private comsumption had been uneven across the five markets it covered.
They noted that private consumption continued to register a healthy pace in Malaysia and the Philippines but “moving sideways” in Indonesia while it had been less inspiring in Thailand and Singapore.
Malaysia, which posted a 32.5% year-on-year surge in exports for May, will be releasing second-quarter ended June 30 gross domestic product (GDP) data on Aug 18.
Private consumption in Malaysia has been resilient despite inflationary pressure, low-wage growth and higher unemployment, with several analysts attributing gains in the stock market for an improvement in still-fragile consumer confidence. The FBM KLCI has gained nearly 7% year-to-date.
Morgan Stanley expects consumer spending to remain healthy, growing at 6.6% this year and 6.4% next year, with exports recovery to give a boost to employment and wage growth.
While the outlook for Singapore’s economy has improved after the island-state narrowly avoided recession with a 0.4% GDP growth for the second quarter ended June 30 compared to the first quarter’s 1.3% contraction, private consumption remains tepid.
On a year-on-year basis, GDP expanded 2.5% for the second quarter compared to the same quarter last year, which was also revised to 2.5% from 2.7%.
Singapore’s growth was mainly driven by an improvement in manufacturing activities, especially from electronics and precision engineering industries, due to stronger global demand.
Notably, the services sector, making up two-thirds of its economy, recovered to a growth of 0.4% in the second quarter compared to the 2.7% contraction in the first quarter.
AmBank Research chief economist Anthony Dass said in Singapore’s case, growth sustainability really depended on the outlook of the services sector and whether it could absorb any shortfall arising from the manufacturing sector.
However, signs continue to show improvement in domestic-economy factors, with Dass noting that the property market may have hit rock bottom.The construction sector, another domestic-economy indicator, also showed recovery, expanding 4.3% compared to the previous quarter, the strongest showing in six quarters.
 
Source: The Star
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Jul 2017 11

Stronger ringgit to drive auto stocks

PETALING JAYA: Automotive stocks are expected to perform better in the second half of 2017, driven by stabilising loan approvals, car launches and further strengthening of the ringgit. MIDF Research in a report...

PETALING JAYA: Automotive stocks are expected to perform better in the second half of 2017, driven by stabilising loan approvals, car launches and further strengthening of the ringgit. MIDF Research in a report yesterday said loan approval rates had stabilised between 50% and 60% over the past 12 months, with car loan application trends showing improvements due to steady demand.

The research house also said auto players had become more creative with their financing solutions, such as offering lower monthly repayments.“The idea is to lower the monthly commitment of car buyers, allowing them to better qualify for financing, as approval by financial institutions places high priority on a borrower’s monthly loan commitment relative to his net monthly income.” MIDF said sector earnings recovery will be underpinned by more favourable foreign exchange that will lower import cost.“Imported components account for 25% to 35% of total cost for the non-national makes. The ringgit has strengthened from the year low of RM4.50 to the dollar to the current RM4.30 levels.” Similarly, the research house said the ringgit had also strengthened against the yen.

“All the auto players under our coverage will benefit from the stronger ringgit, namely Bermaz Auto Bhd (BAuto), mainly from the yen and UMW Holdings Bhd and Tan Chong Motor Holdings Bhd from the weaker dollar. “For BAuto, every 1% change in the yen will impact 2018 earnings by 3%. For UMW and Tan Chong, every 1% change in the dollar will impact 2017 by 6.5% and 35% respectively.” Among the key new models to come, said MIDF Research, are Mazda’s new CX5 and CX9 (in October and this month respectively), Toyota’s indicative four new models (all in the second half of 2017) and possibly a new Myvi from Perodua (later this year). “We expect these launches to drive a marked improvement in total industry volume (TIV) from July onwards.”

The research house added that the downward consensus earnings revisions in the past two years have reached a bottom and has in fact rebounded for selective stocks, such as UMW and BAuto. “This upward revision was driven largely by expectations of a rebound in sales volumes but has yet to factor in improvements in forex expectations, suggesting further possible upside to forecasts if the ringgit strength sustains.” According to the Malaysian Automotive Association (MAA), year-to-date May vehicle sales rose 7% to 234,186 units compared with 218,121 units in the first five months of 2016. The MAA projects a 1.7% year-on-year TIV growth to 590,000 units this year, and will have its second biannual briefing on local vehicle sales performance this month. TIV hit 580,124 units last year, meeting the association’s target of 580,000 units for 2016. The last time TIV fell below the 600,000-mark was in 2009 with 536,905 units. In 2010, sales hit 605,156 units. Vehicle sales hit a record-breaking 666,674 units in 2015.

 

Soure: The Star

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Jul 2017 4

Mohd Irwan: Malaysia's 2017 GDP growth can hit 5%

CYBERJAYA: Malaysia's economy can grow 5% or more this year, based on the country's first-half performance, said Treasury Secretary-General Tan Sri Dr Mohd Irwan Serigar Abdullah."The country's economy is performing well,...

CYBERJAYA: Malaysia's economy can grow 5% or more this year, based on the country's first-half performance, said Treasury Secretary-General Tan Sri Dr Mohd Irwan Serigar Abdullah.

"The country's economy is performing well, and I personally think we can achieve 5% or more in GDP growth, backed by the strengthening economic environment, the increase in exports and investments, and job creation.

"We also see the oil price stabilising at between US$47 and US$50 per barrel, and I think the ringgit will be getting better," he said, commenting on a recent Bloomberg report, "The Ringgit Is Easily Asia'ss Strongest Currency", which said the ringgit was the most stable major Asian currency during the first quarter of this year.

Malaysia's economy recorded 5.6% in the first quarter of this year, boosted by strong domestic demand and private expenditure.

Mohd Irwan, who is also chairman of the Malaysian Global Innovation and Creativity Centre (MaGIC), was speaking to reporters after launching MaGIC's Global Accelerator Programme in Cyberjaya on Tuesday.

He said Malaysia's economy was never "in doom and gloom", and that the economic slowdown was due to the volatility in oil price and global market sentiment.

Asked if Malaysia would revise the GDP projection, Mohd Irwan said, the Government was meeting with the Economic Planning Unit (EPU) and Bank Negara to see whether there was a need to revise it in Budget 2018, scheduled to be tabled on Oct 27.

Yesterday, Prime Minister Datuk Seri Najib Tun Razak said in his blog posting that Malaysia was able to record achievements that it could be proud of despite challenges such asthe global market uncertainty and falling oil prices.

He said that overall, the country's economic performance for the first quarter of 2017 remained stable and strong, expanding by 5.6%, with foreign direct investment rising to RM17 billion.

Source - Bernama
 

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Jul 2017 3

Ringgit higher versus US dollar on Monday

KUALA LUMPUR: The ringgit opened higher on Monday following the bearish sentiment in the market for the US dollar after the release of its first-quarter gross domestic product (GDP) data last week, a dealer said.At 9am, the...

KUALA LUMPUR: The ringgit opened higher on Monday following the bearish sentiment in the market for the US dollar after the release of its first-quarter gross domestic product (GDP) data last week, a dealer said.

At 9am, the ringgit traded at 4.2900/2970 against the greenback from 4.2920/2950 on Friday.

The dealer said at the beginning of this year, the Donald Trump-fuelled US dollar rally left the currency vulnerable to heavy losses and after six months, the greenback still lacked strong and fresh catalysts.

The US released its better-than-expected GDP data last week which showed that the US economy advanced 1.4%. Corporate profits, however, declined despite the upbeat data.

 

Overall, investors remained focus on central banks' intentions to tighten monetary policies.

Against a basket of major currencies, the ringgit traded mixed.

It rose against the Singapore dollar to 3.1155/1210 from 3.1181/1220 on Friday and strengthened against the yen to 3.8194/8267 from 3.8328/8365.

The local note fell against the British pound to 5.5787/5904 from 5.5757/5801 and eased slightly against the euro to 4.8970/9055 from 4.8963/8015 on Friday.

 

Source: Bernama

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Jun 2017 30

Ringgit is Asia's strongest currency

KUALA LUMPUR: Malaysian assets are back in favour as investors focus on encouraging signs of an economic turnaround instead of a scandal that has touched the top of government and as far as Hollywood.The stark shift means...

KUALA LUMPUR: Malaysian assets are back in favour as investors focus on encouraging signs of an economic turnaround instead of a scandal that has touched the top of government and as far as Hollywood.

The stark shift means that Prime Minister Datuk Seri Najib Tun Razak, who has weathered political attacks and protests going back to 2015 over allegations involving state-owned 1Malaysia Development Bhd., may call an early election to cement his hold on power.

The ringgit is easily the strongest major Asian currency this quarter, climbing more than twice as much as the next best, the Chinese yuan. Global funds have bought the most Malaysian stocks year-to-date since the same period in 2013, and net inflows to the bond market surged in April and May.

Malaysia has been rocked by far-reaching investigations into investment fund 1MDB, yet double-digit acceleration in the country’s exports has lifted the economy, which grew 5.6% on-year in the first quarter, the most since early 2015.

 

“With improving macro-economic conditions in Malaysia, we became more positive in mid-2017 for the general Malaysia outlook, although there are still political and corruption concerns,” said Hakan Aksoy, a fund manager at Pioneer Investment Management Ltd., which oversees US$244bil globally. 


“As long as we see improvement on the macro data with the support of global conditions and stable energy prices, we will keep our cautiously positive stance for Malaysia,” London-based Aksoy said.

Overseas investors have purchased US$2.48bil of Malaysian equities this year, the biggest stock inflow in Southeast Asia. The FTSE Bursa Malaysia index hit its highest in two years on June 16 as technology, banks and construction shares soared.

Samsung Asset Management is buying Malaysian banking, property and construction stocks on bets the government will pump prime ahead of the election, according to Hong Kong-based fund manager Alan Richardson. Meanwhile, it’s paring technology and commodity-related holdings.

“Domestic cyclicals will outperform while global cyclicals will underperform,” Richardson said. This is due to “a combination of global monetary stimulus and domestic early election stimulus.”

The stock market’s gains came as the ringgit rebounded from a 19-year low. After missing out on an earlier rally in regional currencies, it strengthened as growth quickened and concerns eased over an earlier move by the central bank to deter currency speculators.

Bond investors have also returned. Malaysian debt securities drew more than RM16bil (US$3.7bil) in April and May after recording the longest stretch of outflows in two years. The yield on 10-year notes has fallen 56 basis points to 3.9% since reaching an eight-year high in November.

Still, not everyone is convinced. Nomura Holdings Inc. is underweight on Malaysian stocks, citing expensive valuations and doubts that the growth momentum can be sustained.

“I find it difficult to justify buying Malaysia’s genuine story while ignoring the risks on valuations and also the existing risk that the Malaysian market comes with,” said Mixo Das, Nomura’s Southeast Asian equity strategist in Singapore. “The market probably goes up a bit more till the election, but what happens after it?”

A general election isn’t due until mid-2018, but there’s growing speculationthat Najib will call for polls this year with growth holding up and the opposition parties racked by infighting. The premier said earlier this month that preparations for the election were going well.

The economic outlook has helped to counter headlines involving 1MDB, which is at the center of money-laundering allegations and probes in several countries. The U.S. Justice Department is seeking to recover US$1.8bil in assets it says were bought with funds misappropriated from 1MDB.

Complaints filed in a U.S. court alleged that from 2009 through 2015 more than US$4.5bil belonging to 1MDB was diverted by officials of the fund and their associates. Najib, who until last year was the chairman of 1MDB’s advisory board, has denied wrongdoing and was cleared by Malaysia’s attorney general.

For Schroder Investment Management Ltd., economic factors trump politics when investing in Malaysian bonds. It also favors the ringgit due to the nation’s positive outlook.

“Key considerations are improving fiscal dynamics, dynamics around central bank policy, attractive economic policies, sensitivity to developed market and China developments,” said Manu George, a Singapore-based fixed-income director at the firm. - Bloomberg

 

Source: The Star

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Jun 2017 29

Ringgit seen stabilising further on weakening US dollar

PETALING JAYA: The ringgit may stabilise further in the coming months as the US dollar weakens, with an added boost coming from a combination of foreign fund inflows and exporters converting three quarters of their earnings...
PETALING JAYA: The ringgit may stabilise further in the coming months as the US dollar weakens, with an added boost coming from a combination of foreign fund inflows and exporters converting three quarters of their earnings back into ringgit.
 
Although the US dollar strengthened against the ringgit yesterday, with the currency retreating from a seven-day gain tracking losses in other regional currencies, the greenback has actually declined by 2.94% since early April to yesterday.
 
On a year-to-date basis, the US dollar has weakened by 4.45%.According to a report by Bloomberg, CIMB Investment Bank Bhd group head of treasury and markets Chu Kok Wei expects the ringgit to trade against the greenback at 4.10 to 4.15 by year-end despite some volatility along the way.
 
He said the ringgit faced the danger of getting cheaper earlier because the currency was undervalued, causing investors to cut losses, but that at current levels looks “a lot more reasonable”.
 
Citigroup forex analysts said a hawkish European Central Bank tends to be less disruptive for emerging-market currencies compared to a hawkish US Federal Reserve, which raised the benchmark federal funds rate by 25 basis points recently to between 1% and 1.25%.
 
The analysts said in a report that improving energy and industrial commodity markets also support sentiment towards emerging-market currencies for now.“However, the equity market uncertainty likely will keep investors wary of adding exposure at this time to Asia’s most equity-sensitive currencies (such as the won, Taiwanese dollar and Indian rupee).
 
“Instead, we continue to prefer exposure to more US-dollar, index-sensitive currencies (such as the yuan, Singapore dollar and baht) at this time,” they added.Asian stock markets were broadly down yesterday except for Indonesia’s Jakarta Composite Index, after the US equities closed lower on Tuesday dragged by large-cap technology stocks.“The heaviest foreign buying was recorded last Thursday as net purchases surged to RM208.9mil, as the fall in the crude oil price prompted investors to embark on bargain hunting in the local bourse.
“This coincided with other regional markets that experienced heavy foreign buying, notably Korea and Taiwan,” the research house said in a report.
 
MIDF said Sime Darby Bhd saw the highest net money inflow of RM13.44mil last week, followed by Malayan Banking Bhd and Cahya Mata Sarawak Bhd at RM10.29mil and RM4.63mil, respectively.Local institutional funds, meanwhile, sold RM249.7mil of local stocks last week after a net purchase of RM135.9mil a week earlier.
 
However, Maybank Investment Bank Bhd forex research head Saktiandi Supaat was more cautious on the ringgit’s outlook, saying that there would be resistance at the 4.30 and support at the 4.25 levels.“Our bias remains to lean against strength,” he said in a report.
 
Source: The Star
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Jun 2017 22

Malaysia’s CPI up 3.9%

PETALING JAYA: Malaysia’s consumer price index (CPI) measuring headline inflation rose a lower than expected 3.9% in May compared to a year ago as fuel prices fell.Economists had expected a 4.1% rise in the CPI, which...

PETALING JAYA: Malaysia’s consumer price index (CPI) measuring headline inflation rose a lower than expected 3.9% in May compared to a year ago as fuel prices fell.

Economists had expected a 4.1% rise in the CPI, which includes volatile food and fuel prices. Core inflation, which excludes food and fuel, rose 2.6%.

The CPI rose 4.4% in April and to an eight-year high of 5.1% in March. Compared to April, headline inflation was 0.5% higher.

Statistics Department data showed that the transport gauge that includes fuel was 13.1% higher in May compared to April’s 16.7%. Other groups that contributed to the CPI included food and non-alcoholic beverages, recreation services and culture, health, restaurants and hotels as well as housing and utilities.

 
 
 

Nomura Holdings Inc senior economist Euben Paracuelles said in a report that the May inflation data supports the view that March marked the peak for inflation this year.

He expects inflation to moderate throughout the rest of the year with full-year headline inflation of 4% compared to Bank Negara’s 3% to 4% range.

Meanwhile, Citigroup Inc economist Kit Wei Zheng said the rise in core inflation has now gone above the central bank’s comfort threshold of 2.3% to 2.5%.

Bank Negara’s measure of everyday price inflation and perceived price inflation, which both captures price increases in frequently purchased items that make up 60% of the CPI basket, has been persistently higher than headline CPI. Kit said this could be seen as a proxy for elevated inflation expectations.

“With the output and private consumption gap likely to turn positive in 2017, alongside a pick-up in wage growth, we suspect Bank Negara’s benign view of demand-pull inflation could be challenged within the next six to 18 months,” he added.

Kit said Malaysian policymakers face more pressure to raise benchmark interest rates compared to the rest of Asean.

“The precise timing remains uncertain however, and we see a risk that moderating headline inflation could give room to postpone a hike into 2018,” he said.

Source: The Star

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Jun 2017 21

Malaysian bank credit profiles stable amid growing challenges

PETALING JAYA: A combination of slower growth and higher leverage in Malaysia increases credit risks for the country’s banks, S&P Global Rating said. “Malaysia’s economic expansion shifted to a lower gear two years...

PETALING JAYA: A combination of slower growth and higher leverage in Malaysia increases credit risks for the country’s banks, S&P Global Rating said. 

“Malaysia’s economic expansion shifted to a lower gear two years ago, and the momentum has not returned. A weak energy sector, subdued global demand, and tightened domestic spending continue to drag on growth,” said S&P Global Ratings credit analyst Rujun Duan. 

Meanwhile, however, corporate and household indebtedness has been steadily rising in an environment of low interest rates and easing credit conditions.

“In 2016, the Malaysian banks we rate reported weak earnings growth, and we expect their full year profitability to remain sluggish in 2017, 

 

“A weakening bank earnings trend comes on the back of slower loan growth, tight margins, and weakening asset quality in a few areas, such as commodities-related overseas loan portfolios and household credit. 


“In addition, banks face potential risks due to their exposure to industries with structural or cyclical difficulties, such as commercial real estate and automobiles.

“Heightened leverage in households and the corporate sector, low commodity prices, and oversupply in commercial property add to asset-quality 
vulnerabilities,” she said. 

The international rating agency said in its view, however, a number of counterbalancing factors support Malaysian banks credit profile. 

Industry-wide impaired loan ratios are hovering around a historical low of 1.6%. Capital and liquidity buffers are more than ample to absorb increased stresses. 

Separately, it believe prudential measures implemented by the regulators and tighter underwriting standards enforced by banks will also help to keep credit risks at bay.

Heightened volatility in the Malaysia’s exchange rate has a limited direct impact on the country’s banks. This is because ringgit assets make up the bulk of bank balance sheets in Malaysia, and foreign currency liabilities are well matched by foreign currency assets. 

Prudent oversight from the regulator also helps to mitigate the relevant risks, S&P Global noted. 

Despite the clear merits of a more consolidated banking sector for Malaysia, the research agency said a number of stumbling blocks could make consolidation a protracted process, especially in a slowing growth environment. Obstacles include difficulties in extracting synergies from deals, or agreeing on retrenchments and restructuring.

Source: The Star

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Jun 2017 13

Ringgit marginally higher at opening

KUALA LUMPUR, June 13 — The ringgit opened marginally higher this morning on higher interest for the local currency, a dealer said.At 9am, the local unit was quoted at 4.2630/2670 against the greenback from last Friday's 4....

KUALA LUMPUR, June 13 — The ringgit opened marginally higher this morning on higher interest for the local currency, a dealer said.

At 9am, the local unit was quoted at 4.2630/2670 against the greenback from last Friday's 4.2635/2665.

FXTM Research Analyst Lukman Otunuga said caution still lingered in the air as traders were alert of macroeconomic events that could spark extreme volatility in the market.

“With political uncertainty in the United States and soft economic data weighing heavily on the US dollar, the outlook remains tilted to the downside,” he said.

Lukman noted that investors were still questioning US President Donald Trump's impeachable offence by sharing classified information with Russia and attempting to interfere with US-Russia relations.

Against a basket of major currencies, the ringgit was traded lower except against the British pound.

It slipped marginally against the Singapore dollar to 3.0798/0838 from 3.0795/0827 and depreciated versus the yen to 3.8755/8805 from 3.8615/8653 last Friday.

The local unit edged up to 5.3987/4042 from 5.4291/4351 compared with the British pound and declined against the euro to 4.7716/7769 from 4.7628/7674 last Friday.

The foreign exchange market was closed yesterday for the Nuzul Al-Quran public holiday. — Bernama

Source: Malay Mail

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Jun 2017 6

Malaysia’s exports still grow at a robust pace

Expansion due to strong E&E demand, higher commodity pricesPETALING JAYA: Malaysia’s exports continued to grow at a robust pace in April, thanks to a strong demand for electrical and electronic (E&E) products and...

Expansion due to strong E&E demand, higher commodity prices

PETALING JAYA: Malaysia’s exports continued to grow at a robust pace in April, thanks to a strong demand for electrical and electronic (E&E) products and higher commodity prices.

Although the country’s export growth had eased to 20.6% in April, compared with 24.1% in the preceding month, the pace came in within the Bloomberg consensus estimate.

With the steady growth in exports, Malaysia’s trade surplus increased to its highest value year-to-date at RM8.8bil in April. Imports during that month expanded at a slower pace of 24.7%, compared with 39.4% in March.

According to AllianceDBS Research chief economist Manokaran Mottain, the solid expansion in exports thus far indicates that Malaysia’s gross domestic product (GDP) growth in the second quarter of this year would still remain strong.

“In view of the expansion in exports, especially exports of manufactured goods, we reckon that the second-quarter GDP growth could still be strong,” Manokaran said in his report yesterday.

He expected the second-quarter GDP growth to range between 4.8% and 5.2% this year, pushing the full-year forecast to 4.8%.

“Export growth remains solid mainly due to the strong performance of E&E exports and the continued rebound in the oil and gas shipment, which contributed 7.9% and 2.1% to export growth, respectively. The double-digit export growth continues to be sustainable for the sixth consecutive month and has been the longest positive growth streak since January 2016,” Manokaran pointed out.

Noting that import growth in Malaysia thus far this year had been driven by the buying of capital goods, Manokaran said the trend could be indicative of robust infrastructure and investment projects in the country.

“One plausible explanation for the surge in capital imports could be to support the various infrastructure projects in the pipeline, as well as various investment projects coming into effect this year,” he explained.

Meanwhile, MIDF Research said global indicators suggested that Malaysia’s trade performance would remain strong through the remaining year.

“Business and consumer confidence in the developed and emerging economies indicates an optimistic outlook for the coming months,” MIDF Research said in its report.

The brokerage pointed to the expansion in China’s manufacturing and non-manufacturing purchasing manager’s indices in May and the University of Michigan’s consumer sentiment for the United States that rose to its four-month high of 97.1 in May as examples.

“Based on the current trends, we believe robust global demand will maintain and support Malaysia’s trade performance in the near term... we foresee Malaysia’s external trade continuing to record double-digit growth in May, given the sustained favourable external environment,” MIDF Research explained.

In addition, it said the risks of protectionism and geopolitical risks were receding, while major economies were undergoing a gradual economic recovery.

“An improvement in commodity prices will provide better prospects for Malaysia’s exports in 2017, especially for the commodities-based sector. Hence, we opine that our external trade performance will perform significantly better in 2017,” MIDF Research said.

It expected Malaysia’s export growth to average 8.5% in 2017, compared with only 1.1% last year.

RHB Research expected Malaysia’s export growth to average 10% this year.

“We are of the view that the recovery in global trade remains on track, indicated by the strong pick-up in exports across the region since late last year,” the brokerage said in its report.

“Given that the export performance for the first quarter of 2017 had exceeded expectations, we are forecasting exports to grow by 10% this year, from 1.1% in 2016, on account of a recovery in demand for commodity products, aided by higher prices, a pick-up in global semiconductor sales in late 2016, translating into higher E&E exports and an improving global trade outlook on the back of stronger global growth prospects,” it added.

Source: The Star

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