PP 7767/09/2010(025354)

Economic Highlights
Global
•
MARKET DATELINE

1 October 2010

1 Japan’s Factory Output Softened Further And The

Government May Act To Help The Economy

2 Euroland’s Inflation And Business Confidence Picked Up,

While Consumer Confidence Held Stable

3 Thailand’s Economic Activities Moderated In August

Tracking The World Economy...

Today’s Highlight

Japan’s Factory Output Softened Further And The Government May Act To Help The Economy

Japan’s factory output fell by 0.3% mom in August, following a 0.2% decline in July. This was the third straight month
of decline, suggesting that a slowdown in global demand led companies to cut production. Yoy, industrial production,
however, inched up to 15.4% in August, from +14.2% in July but off the peak of +31.8% in March, suggesting that
industrial activities are losing momentum.

The m-o-m drop in factory output could add pressure on the Bank of Japan to do more to help the economy by preventing
the yen from rising too fast and too strong, as companies, particularly exporters, are increasingly nervous about a
persistently strong yen and slowing overseas demand. As a result, companies surveyed by the trade ministry expect
production to fall by a larger magnitude of 2.9% mom in October, after a decline of 0.1% in September. This is made
worse by the end of a month long government programme in encouraging consumers to buy fuel-efficient cars. Consequently,
automakers were the most pessimistic in their outlook, forecasting a 10.5% slide in output in October after a 4.6% drop
in September.

Consequently, Japan renewed its vow to tame the strong yen. Japan intervened in the foreign exchange markets on
15 September, the first in more than six years, when the yen traded at a 15-year high of ¥82.87/US$. Similarly, the
government has unveiled a new ¥915bn (US$10.9bn) stimulus package in early September, and more money looks to
be on the way after it draws up an extra budget for this fiscal year.

Separately, retail sales grew at a faster pace of 1.4% mom in August, compared with +0.7% in July. This was the third
straight month of increase, indicating that consumers are still spending, albeit cautiously. Yoy, retail sales strengthened
to 4.3% in August, from +3.8% in July but off a high of +4.9% in April.

The Euroland Economy

Euroland’s Inflation And Business Confidence Picked Up, While Consumer Confidence Held Stable

‹ Euroland’s preliminary headline inflation rate inched up to 1.8% yoy in September, from +1.6% in
August. This was the highest in 22 months, suggesting that price pressure is gradually creeping up due partly to
the low base effect given that inflation rate contracted by a larger magnitude in the same month last year. Although
inflation in the region is trending up, it remains gradual and will likely be manageable. This suggests that the
European Central Bank (ECB) will likely keep its key policy rate unchanged in the near term, after extending

Peck Boon Soon

(603) 9280 2163
Please read important disclosures at the end of this report.
bspeck@rhb.com.my

A comprehensive range of market research reports by award-winning economists and analysts are Page 1 of 3
exclusively available for download from www.rhbinvest.com
 1 October 2010

its liquidity support to banks into January 2011 in September. However, a string of ECB governors, led by the
Germany, have said this week that emergency support must be withdrawn soon, implying that they want to phase
out the unlimited lending facilities that have acted as life support for banks of high debt countries in the region.
This raises concerns that the ECB may exit prematurely, risking a repeat of the premature tightening in mid-2008.
As it stands, lenders from Greece, Ireland, Portugal and Spain have borrowed €361bn from the ECB or 60% of
the total. Also, the ECB has bought €60bn of European Monetary Union bonds directly, including an estimated
€18bn of Irish debt.

‹ Business confidence index in the Euroland improved to -2 in September, from -3 in August. This was
the smallest drop in more than two years, suggesting that business confidence continued to improve despite a
slowdown in the global economy. Businesses expect future production and selling price to pick up. Also, a smaller
drop in orders and exports as well as employment boosted their confidence. The past production, on the other
hand held stable during the month. Consumer confidence index, however, held stable at -11 in September,
the same level as in August. This suggests that consumers are still cautious even though their pessimism has been
improving since April 2009, as they expect economic activities to worsen. As a result, they expect their income
to remain unchanged and unemployment to improve gradually. Consumers, in general, were still reluctant to
increase major purchases going forward, suggesting that consumer spending will likely remain weak in the near
term. As a whole, the region’s overall sentiment index inched up to 103.2 in September, the highest since January
2008 and from 102.3 in August. This suggests that the Euroland economy will likely sustain its expansion
in the months ahead, albeit at a more moderate pace.

Asian Economies

Thailand’s Economic Activities Moderated In August

‹ Thailand’s manufacturing production slowed down to 8.7% yoy in August, the slowest pace in 10 months and from
+13.1% in July, indicating that manufacturing activities are slowing down. Exports, however, bounced back to
+23.6% yoy in August, after easing to 21.2% in July but off a high of +47.1% in June, suggesting that Thailand’s
exports are also heading south, in line with a slowdown in the global economy. As a result, private business
investment indicator softened to 22.1% yoy in August, the first easing after reaching a high of +22.9% in July,
indicating that businesses are likely to turn cautious in spending in the months ahead. Already, their confidence
fell for the second consecutive month during the month. Private consumption indicator, however, rebounded to
+6.7% yoy in August, from +5.1% in July but off a recent high of +8.3% in June, indicating that consumer spending
is turning weaker as well. As a whole, the major economic indicators suggest that Thailand’s economy
is likely to slow down further in the 3Q, after slackening to 9.1% yoy in the 2Q.

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB
Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as
may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable
and are subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as
a result of using different assumptions and criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the
securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such
statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have
an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances
and objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that
investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The
appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI,
RHB Group nor any of its affiliates, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of
this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities
as well as providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing
activities, any member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or
the accounts of customers, in debt or equity securities or loans of any company that may be involved in this transaction.

A comprehensive range of market research reports by award-winning economists and analysts are
Page 2 of 3
exclusively available for download from www.rhbinvest.com
 1 October 2010

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the
respective directors, officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will
seek investment banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or
in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may
not reflect information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received
compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm
revenues.

A comprehensive range of market research reports by award-winning economists and analysts are
exclusively available for download from www.rhbinvest.com Page 3 of 3