No change in OPR as widely expected. Bank Negara Malaysia (BNM) left the Overnight Policy Rate (OPR) at a record-low of 2% after the Monetary Policy Committee meeting yesterday (26 May ‘09), as it did on 29 Apr ‘09. Previously, the OPR was lowered by a total of 150 bps on three occasions between Nov ’08 and Feb ’09.

1. Equity Research
PP11072/03/2010 (023549)
Economics 27 May 2009
Overnight Policy
Rate (OPR) Stays at 2%
No change in OPR as widely expected. Bank Negara Malaysia
Suhaimi Ilias (BNM) left the Overnight Policy Rate (OPR) at a record-low of 2% after
Suhaimi_ilias@maybank-ib.com the Monetary Policy Committee meeting yesterday (26 May ‘09), as it
(603) 2297 8682 did on 29 Apr ‘09. Previously, the OPR was lowered by a total of 150
bps on three occasions between Nov ’08 and Feb ’09.
Ramesh Lankanathan
ramesh@maybank-ib.com BNM’s MPC Meetings in 2009
(603) 2297 8685 Dates Outcome
21 Jan ’09 (Wednesday) 75bps reduction in OPR to 2.5%
24 Feb ’09 (Tuesday) 50bps reduction in OPR to 2%
29 Apr ’09 (Wednesday) OPR maintained at 2%
26 May ’09 (Tuesday) OPR maintained at 2%
29 Jul ’09 (Wednesday) TBA
25 Aug ’09 (Tuesday) TBA
28 Oct ’09 (Wednesday) TBA
24 Nov ’09 (Tuesday) TBA
Source: BNM
Malaysia: OPR (% p.a.) & SRR (%)
4.5
4.0
3.5
3.0
2.5
2.0
1.5
Statutory Reserve Requirement: Commercial Banks
1.0
Overnight Policy Rate: Bank Negara Malaysia
0.5
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Source: BNM
Impact of Previous OPR cuts on BLR and FD Rates
st nd rd
1 OPR cut 2 OPR cut 3 OPR cut
(24 Nov ’08) (21 Jan ’09) (24 Feb ’09)
OPR 3.25% (-25bps) 2.50% (-75bps) 2.00% (-50bps)
SRR 3.50% (-50bps) 2.00% (-150bps) 1.00% (-100bps)
BLR (average) 6.48% @ end-Dec 5.89% @ end-Feb 5.53% @ 15 Apr ’09
‘08 (-24bps) ’09 (-59bps) (-36bps)
FD rate:
1-month 3.00% (-10bps) 2.50% (-50bps) 2.00% (-50bps)
3-month 3.50% (-20bps) 3.00% (-50bps) 2.50% (-50bps)
Source: Maybank-IB

2. Overnight Policy Rate
We expect OPR to remain at 2% until next year. There has been a
shift in the central bank’s tone with regards to the economic conditions
and outlook (see table below), suggesting that BNM is less inclined to
cut the OPR further. Consequently, we maintain our recently revised
view of OPR remaining at 2% (versus 1.5% previously) until next year.
Tracking BNM’s Sound Bytes: “Changing Tune”…
Sources… Remarks About Economic Conditions & Outlook… Sources… Remarks About Economic Conditions & Outlook…
MPS, …the outlook for global growth has deteriorated Governor, OPR cuts have been “front-loaded”. Therefore, if we
24 Nov ‘08 further. Several major advanced economies are now in 27 Apr ’09 already see an improvement expected to take place in
recession amid severe stress in their respective financial the second half of the year, and certainly further
systems. The sharp slowdown in global demand, the improvement going into next year, we should have done
significant fall in commodity prices and the substantial most of what we need to do now. Both global and local
decline in equity prices have exerted greater downward economies are expected to improve by the second
pressure on the growth prospects of regional economies. half of the year.
The adverse global developments have already
affected the Malaysian economy, as evidenced by the
slowdown in export performance and lower equity prices.
MPS, The international economic and financial conditions MPS, The global economic conditions deteriorated further in the
21 Jan ‘09 have deteriorated much more significantly in the 29 Apr 09 first quarter of 2009. Major advanced economies are still
recent period. The major industrial economies are now experiencing a deepening economic contraction.
experiencing a recession and this has significantly Regional economies have also recorded a sharp
increased the risks to global growth. economic slowdown in the first quarter. While the near-
term economic outlook will continue to remain weak, the
The sharper deterioration of the global economy is
implementation of large stimulus measures by several
expected to have a greater impact on the Malaysian
countries has increased the prospects for economic
economy. The large decline in external demand has
conditions to improve in the second half of the year.
already led to a contraction in exports and a moderation
in the pace of private investment activity. In addition, The (Malaysian) economy, therefore, is expected to
these developments have also affected labour market record a marked contraction in the first quarter of 2009.
conditions. These conditions are expected to prevail until the second
quarter of the year. Nevertheless, some signs of
moderation in the pace of decline in economic
activity have emerged. The current assessment is
that the domestic economy is expected to improve in
the second half of 2009, supported by stabilisation in
global economic conditions and the larger impetus from
the implementation of the fiscal stimulus measures.
Going forward, the implementation of the fiscal stimulus
measures, and the accommodative monetary
environment following the previous reductions in the
OPR, will provide support to domestic economic activity.
MPS, 24 The international economic and financial Governor, Right now the assessment is that there will be an
Feb ‘09 environment has deteriorated sharply in the recent 9 May ’09 improvement in the second half of the year,
quarter. The major advanced economies are especially in the fourth quarter.
experiencing a deepening economic contraction, while
the regional economies are experiencing a rapid
slowdown. The impact of the rapid decline in global
demand on trade, production and investment activities in
the Asian region has intensified…The downside risks to
the global economic outlook have increased significantly.
The Malaysian economy has been adversely
impacted by these global developments... The
domestic economic conditions are expected to continue
to remain challenging in the coming quarters with the
continued deterioration in the global economy… this has
raised the risk of an economic contraction in 2009....
MPS, The deterioration in the world economy during the first
26 May 09 quarter was worse than expected as the global financial
turmoil became more prolonged… the spillover effects
have led to a severe contraction in economic activity in
the advanced economies.
The domestic economy continues to be adversely
affected by the significant contraction in external
demand... This has resulted in a marked contraction in
the Malaysian economy in the first quarter of 2009. These
conditions have continued into the second quarter.
However, a more modest pace of decline in the latest
indicators of global economic activity suggest the
potential for a gradual improvement in the second
half of the year.
Source: BNM, Media Reports
27 May 2009 Page 2 of 4

3. Overnight Policy Rate
Global interest rate downcycle is also shifting into low gear. Our
Global Benchmark Interest Rate Action Diffusion Index that measures
the tightening/easing bias by central banks was -17 this month vs -19 in
Apr ‘09 and the recent low of -23 in Mar ‘09, as fewer central banks
(CBs) cut (May ‘09: 17 CBs vs Mar ‘09: 23 CBs) and more maintained
(May ‘09: 28 CBs vs Mar ‘09: 22 CBs) their interest rates.
Global Benchmark Interest Rate Action Diffusion Index
20
quot;Tighteningquot; Bias
15
10
5
0
Oct-05
Apr-08
Oct-00
Apr-03
Dec-04
Aug-06
Nov-07
Sep-08
Sep-03
Dec-99
Aug-01
Nov-02
Jan-07
Jun-07
Jan-02
Jun-02
Jul-04
Jul-99
May-05
May-00
Mar-06
Feb-09
Mar-01
Feb-04
Feb-99
(5)
(10)
(15)
quot;Easingquot; Bias
(20)
(25)
The index refers to the difference between the numbers of central banks raising
interest rates and the number of central banks cutting interest rates, excluding those
that maintained their interest rates, based on the panel of 45 central banks.
Positive/Negative index reading means more central banks raise/cut than cut/raise
their benchmark interest rates during the month.
Source: Bloomberg, Maybank-IB
Weighted Average Global Benchmark Interest Rate (% p.a.)
6.4
5.9
5.4
4.9
4.4
3.9
3.4
2.9
2.4
1.9
Nov-04
Jan-99
Jun-05
Jan-06
Jul-02
May-01
May-08
Mar-00
Feb-03
Mar-07
Oct-00
Apr-04
Oct-07
Aug-99
Dec-01
Sep-03
Aug-06
Dec-08
Based on the average of 45 central banks’ benchmark interest rates, weighted by the
respective country’s GDP
Source: Bloomberg, Maybank-IB
Interest Rate Cuts by Key Central Banks in May ‘09
Country (Benchmark Interest Rates) Current Rate Date Change
(% p.a.) (bps)
South Africa (Repo Rate) 8.50 4 May ‘09 -100
Indonesia (BI Reference Rate) 7.25 5 May ‘09 -25
Eurozone (Repo Rate) 1.00 7 May ‘09 -25
Norway (Deposit Rate) 1.50 7 May ‘09 -50
Iceland (Repo Rate) 13.00 7 May ‘09 -250
Chile (Overnight Rate) 1.25 7 May ‘09 -50
Denmark (Discount Rate) 1.40 11 May ‘09 -35
Russia (Repo Rate) 12.00 14 May ‘09 -50
Turkey (Interbank Rate) 9.75 15 May ‘09 -50
Mexico (Overnight Rate) 5.25 15 May ‘09 -75
Source: Bloomberg
27 May 2009 Page 3 of 4

4. Overnight Policy Rate
Definition of Ratings
Maybank Investment Bank Research uses the following rating system:
BUY Total return is expected to be above 10% in the next 12 months
HOLD Total return is expected to be between -5% to 10% in the next 12 months
SELL Total return is expected to be below -5% in the next 12 months
Applicability of Ratings
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only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not
carry investment ratings as we do not actively follow developments in these companies.
Some common terms abbreviated in this report (where they appear):
Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings
BV = Book Value FV = Fair Value PEG = PE Ratio To Growth
CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio
Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter
CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset
DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity
DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds
EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital
EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year
EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date
EV = Enterprise Value PBT = Profit Before Tax
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27 May 2009 Page 4 of 4