The State Of The Economy Malaysia

The State of the Economy Malaysian consumers attitudes towards the economy and prices

October 2008

© 2008. Synovate Ltd. All rights reserved. The concepts and ideas submitted to you herein are the intellectual property of Synovate Ltd. They are strictly of confidential nature and are submitted to you under the understanding that they are to be considered by you in the strictest of confidence and that no use shall be made of the said concepts and ideas, including communication to any third party without Synovate’s express prior consent and/or payment of related professional services fees in full.

Why is this all so important? - A timeline • August 9th 2007 – Bad news from BNP Paribas triggered a sharp rise in the cost of credit • September 2007 – Northern Rock customers withdraw 1 billion pounds sterling in a day (approx. RM6 billion) • March 2008 – BN loses a number of states in parliamentary elections leading to degree of political and economic uncertainty • June 2008 – Malaysian pump prices rise to RM2.70 on the back of high global oil prices • July 2008 – US Mortgage lender IndyMac collapses • August 2008 – Synovate survey AND SINCE THEN A BARRAGE OF ALMOST DAILY ECONOMIC NEWS ALERTS !!

© Synovate 2008

1

Nearly 6500 interviews across 9 countries in August 2008

© Synovate 2008

2

The Global Economy

How bad is it ? If you live in a ‘developed’ economy, then things are not considered to be getting better anytime soon! Q1: Which of the following statements was most applicable to your view on the current state of the economy in your country?

Malaysia Japan

The economy is going downhill and will get worse before it gets better

Taiwan

Brazil

63

USA

France

63

64

Russia

Turkey

South Africa

49 37 22

39

20 8

[Unit: %] © Synovate 2008

4

Far higher level of optimism in ‘developing’ countries or is it blind optimism? Q1: Which of the following statements was most applicable to your view on the current state of the economy in your country?

Malaysia Japan

The economy is in a bad patch but will quickly get better

Taiwan

Brazil

USA

France

Russia

Turkey

South Africa

55 45

45

42 32

30 22

20

12

[Unit: %] © Synovate 2008

5

Actually it may be naivety – those that have been through economic crises before may have learnt Q1: Which of the following statements was most applicable to your view on the current state of the economy in your country?

15-24

25-34

35-49

50-64

The economy is………..

58

RM999 & below

52

46 36

37

28

24

RM1k1999

47

RM2k3999

RM4k & above

50 40

….in a bad patch but will quickly get better

…going downhill and will get worse before it gets better

17

17

14

21

23

24

[Unit: %] © Synovate 2008

6

A large decline in saving and investing as disposable income becomes reduced with rising inflation costs Q2: Have you changed any of the following monetary habits in the last six months?

Malaysia Japan

Taiwan

USA

France

Russia

Turkey

South Africa

15

Nett Change in People Saving

-9

-11 -28

Nett Change in People Investing

Brazil

-18

-2 -14

-17

-29

-12 -27

-38

-11

-21

-15 -35

-37 -53

[Unit: %] © Synovate 2008

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Half of Malaysians (49% net) are now more likely to check the prices of food items that they buy

© 2008. Synovate Ltd.

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Malaysians appear to be very prudent in comparison to counterparts when it comes to spending on luxuries Q2: Have you changed any of the following monetary habits in the last six months?

Malaysia Spending less on luxuries

Less impulse buying

Compare prices first more

© 2008. Synovate Ltd.

Japan 81

52

59

Taiwan 59

61

56

58

55

57

9

Whilst the more affluent are least likely to be cutting their spending, they are more likely to still be checking cost of products to ensure value

Spending less on Luxuries 100

91

88

Compare Prices More 86 79

50

56

58

MHI
MHI RM1k1,999

65

66

RM2k-3,999

>RM4k

0

© 2008. Synovate Ltd.

10

But the reality is that spending cuts are evident wherever you go… Q3a: Have you had to make cuts in your spending in the past 6 months?

Malaysia Japan

Taiwan

USA

75

69 58

Brazil

62

France

Russia

Turkey

South Africa

80 70

64

61 40

[Unit: %] © 2008. Synovate Ltd.

11

The travel industry in Malaysia is likely to be the hardest hit - indeed this is a global phenomenon Q3b: What was the first item you gave up?

18

Holiday / leisure travel 13

Branded Items

12

Meals with family / partner

11

Big ticket items e.g. TV Foods that are treat

10

Meals with friends

10 6

Fuel for non work trips High-tech gadgets © 2008. Synovate Ltd.

5 12

Generally a climate of worry, although a proportion of Malaysians still remain unconcerned about the state of the economy! Q5: When you think about the current state of the economy, what is your greatest fear? Name one.

Malaysians I am worried about losing my job / household income earner losing job - 25%

Americans Being able to afford mortgage / rent payments - 25%

I am worried about losing my job / Not being able to afford sufficient food for household income earner losing job – 20% my family – 17%

Nothing, I’m not worried – 17%

© 2008. Synovate Ltd.

Losing my investment money – 13%

13

58% of Malaysians have changed a major life decision due to the current economic situation

© 2008. Synovate Ltd.

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And yet some segments still remarkably more buoyant than others about the future over coming 12 months – young Malaysians Q6: Do you think your personal economic situation will get better or worse in the next 12 months? Q7: How about the economic situation in your country? Do you think it will get better or worse on the next 12 months? Better

15-24, n = 287 0

50

Personal Economic Outlook

48

Country’s Economic Outlook

47

© Synovate 2008

25-34, n = 237 100

30 17

18 28

0

50

41

29 22

30 24 36

Same

Worse

50-64, n = 176

35-49, n = 310 100

0

50

33

32 20

27 17 39

100

0

50

30

39

100

23

36 13 35

15

And the most affluent segment who largely believe their personal situation will improve despite the overall climate Q6: Do you think your personal economic situation will get better or worse in the next 12 months? Q7: How about the economic situation in your country? Do you think it will get better or worse on the next 12 months? Better

RM999 & below, n = 123 0

Personal Economic Outlook

Country’s Economic Outlook

© Synovate 2008

50

36

31 24

39 14 35

100

RM1000 - 1999, n = 176 0

50

34

29 24

37 16 33

100

Same

RM2000 - 3999, n = 262 0

50

37

100

35 21

37 18 33

Worse

RM4000 & above, n = 246 0

50

48

100

28 17

35 19 38

16

And we know that Affluent Malaysians have continued in 2008 to invest particularly with diversification in mind…

• Investment in unit trusts and mutual funds increased from 29% to 40% so far in 2008 • Use of Offshore investment accounts increased from 3% to 8% • Residential and commercial property investment increased from 21% to 29%

Source: PAX Malaysia © 2008. Synovate Ltd.

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Source: PAX Malaysia © 2008. Synovate Ltd.

And by mid 2008, affluent Malaysians had spent 12% more on luxury goods compared to one year ago - Particularly on jewelry, watches and clothes 18

So the question is will they continue to do so in this even more uncertain global environment..? Timeline • August 9th 2007 – Bad news from BNP Paribas triggered a sharp rise in the cost of credit • September 2007 – Northern Rock customers withdraw 1 billion pounds sterling in a day (approx. RM6 billion) • March 2008 – BN loses a number of states in parliamentary elections leading to degree of political and economic uncertainty • June 2008 – Malaysian pump prices rise to RM2.70 on the back of high global oil prices • July 2008 – US Mortgage lender IndyMac collapses • August 2008 – Synovate survey • Since then in September alone : • Lehman Brothers files for bankruptcy • Bail-out plans announced by Western governments including US, UK and Iceland • Ongoing impact of credit crunch all around the world…..

© 2008. Synovate Ltd.

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FINALLY – despite everything…. 53% of Malaysians say they are worried but just can’t stop spending all together – the highest out of the 9 countries we surveyed! © 2008. Synovate Ltd.

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Thank You For Your Attention. Our Curiosity Is All Yours.

© 2008. Synovate Ltd. All rights reserved. The concepts and ideas submitted to you herein are the intellectual property of Synovate Ltd. They are strictly of confidential nature and are submitted to you under the understanding that they are to be considered by you in the strictest of confidence and that no use shall be made of the said concepts and ideas, including communication to any third party without Synovate’s express prior consent and/or payment of related professional services fees in full.

© Synovate 2008