PP 7767/09/2010(025354)

Economic Highlights
Global
•MARKET DATELINE

15 July 2010

1 Singapore Annualised GDP Growth Moderated But

Stronger Yoy In The 2Q

2 US Retail Sales Fell In June

3 Thailand Began To Normalise Its Monetary Conditions

4 Singapore’s Non-oil Domestic Exports Rebounded In June

5 India’s Inflation Rate Inched Up In June

Tracking The World Economy...

Today’s Highlight

Singapore Annualised GDP Growth Moderated But Stronger Yoy In The 2Q

Singapore’s preliminary real GDP growth estimate slowed down to an annualised rate of 26.0% in the 2Q, after surging
by a revised 45.9% in the 1Q (+38.6% estimate previously). The moderation was reflected in a slowdown in the
manufacturing sector, which eased to 63.0% in the 2Q, from +201.4% in the 1Q. Similarly, activities in the services sector
weakened to 11.7% in the 2Q, from +16.8% in the 1Q. These were, however, mitigated by a pick-up in construction
activities to 35.9% in the 2Q, from +2.5% in the 1Q.

Yoy, real GDP growth strengthened to 19.3% in the 2Q, from +16.9% in the 1Q and +3.8% in the 4Q of last year. This
was the fourth consecutive quarter of picking up, on the back of a recovery in the global economy. Stronger growth
was underpinned by a pick-up in manufacturing output, which strengthened to 45.5% yoy in the 2Q, from +38.2% in the
1Q. This was on account of a surge in the output of the biomedical manufacturing cluster and a strong expansion in
the electronics output, underpinned by healthy worldwide demand for electronics products. Similarly, the construction
sector grew at a faster pace of 13.5% yoy in the 2Q, compared with +10.2% in the 1Q, supported by an increase in
public sector construction activities. These were aided by a pick-up in activities in the services sector, which inched up
to +11.4% yoy, from +11.2% during the same period. Growth was driven by the trade-related sectors, while the
openings of the Integrated Resorts and higher visitor arrival numbers contributed to the growth in the tourism-related
sectors. The financial services sector also grew strongly, supported by increased foreign exchange trading and domestic
bank lending activities. For 1H 2010, the Singapore economy grew by 18.1% yoy.

The exceptionally strong economic growth in 1H 2010 prompted Singapore to revise upward its real GDP growth forecast
for 2010 from 7.0-9.0% to 13.0-15.0%. However, the exceptionally strong growth will unlikely be repeated in the 2H
of the year and growth is likely to have peaked in the 2Q, as the pace of the global economic growth has slowed even
though it remains on a recovery path. Already, signs of a slowdown in the US labour market are emerging following
the recovery earlier in the year, which will likely affect consumer confidence. In the EU, domestic demand remains
depressed as concerns over the sovereign debt crisis persist. This will likely be made worse by the implementation of
fiscal austerity measures in some of the economies, while the weakening euro will likely dampen EU’s import demand.
The momentum of the global economic recovery has thus moderated, although a double-dip recession remains unlikely
at this juncture, according to Singapore’s MITI.

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
 15 July 2010

The US Economy

Retail Sales Fell In June

◆ US retail sales fell by a smaller magnitude of 0.5% mom in June, compared with -1.1% in May. This was
the second consecutive month of decline, indicating that consumers have turned weaker. The decline was due to
sharper drops in sales of motor vehicles & parts and furniture, while sales of food & beverages and sporting goods
slipped into a contraction. These were, however, mitigated by a pick-up in sales of electronic goods, healthcare
products, clothing and general merchandise as well as sales at eating & drinking places. A smaller decline in sales
of building materials and gasoline also helped. Excluding auto sales, retail sales fell by 0.1% mom in June,
compared with -1.2% in May. Yoy, retail sales eased to 4.9% in June, from +6.5% in May and the high of +10.8%
in March, suggesting that consumer spending is losing momentum. Weaker retail sales coupled with a widening trade
deficit suggests the US economy may moderate further in the 2Q, after recording a slower annualised growth
of 2.7% in the 1Q.

The Euroland Economy

Industrial Production Held Stable Mom In May

◆ Euroland’s industrial production held stable at 0.9% mom in May, the same rate of increase as in April and
compared with +1.8% in March. This was the third month of increase in four months, indicating that industrial
production remained resilient in the region. Stronger growth in the production of durable-consumer goods and a
rebound in the production of non-durable consumer goods as well as energy output were offset by a slowdown in
the production of capital goods and intermediate inputs during the month. Yoy, industrial production moderated to
9.4% in May, from +9.6% in April. This was the first easing after four straight months of picking up, indicating that
the region’s industrial output is beginning to show signs of weakness.

Asian Economies

Thailand Began To Normalise Its Monetary Conditions

◆ Thailand began to normalise its monetary conditions, following the end of political turmoil in the last quarter.
The Bank of Thailand (BOT) increased the one-day bond repurchase rate by 25 basis points to 1.5%, after
keeping it unchanged in the past nine meetings and since it held its key policy rate stable for more than a year
at 1.25% in April 2009. The increase came as no surprise as the central bank has indicated earlier that it intends
to normalise its monetary conditions given that the economy has turned around and expanded strongly by 12.0%
yoy in the 1Q. The move, however, has been disrupted by political unrest in the country, forcing the BOT to delay
its rate hike. Furthermore, the central bank expects inflationary pressure to build up next year with robust economic
expansion. While the strength of the global economy will likely ease in the second half of 2010, as many
governments start to withdraw stimulus policies, the central bank does not expect a double-dip recession. Meanwhile,
Thailand’s inflation rate moderated to 3.3% yoy in June, after bouncing back to +3.5% in May and compared with
the high of +4.1% recorded in January, indicating that price pressure has eased somewhat and will likely be
manageable. Nonetheless, interest rates in Thailand have been at too low a level for comfort and there is a need
for the central bank to normalise its monetary conditions, as the economy emerge from last year’s recession.

Singapore’s Non-oil Domestic Exports Rebounded In June

◆ Singapore’s non-oil domestic exports rebounded to increase by 28.7% yoy in June, from +24.3% in May
but off the high of +30.0% in April. This suggests that Singapore’s exports are easing, but remains resilient.
Stronger growth was underpinned by a pick-up in the exports of electronic products, which accelerated to 43.9%
yoy in June, from +38.9% in May and a low of +21.2% in April, pointing to a resilient demand for these products.
This was due to stronger growth in the exports of ICs, IC parts, disc drives and diodes & transistors. These were,
however, offset partially by a slowdown in the exports of PC parts. A pick-up in the exports of non-electronic
products, which strengthened to 21.0% yoy in June, from +16.2% in May, also helped. This was attributed to a
rebound in the exports of pharmaceutical products, which was offset partially by a slowdown in the exports of
petrochemical products.

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
 15 July 2010

India’s Inflation Rate Inched Up In June

◆ India’s inflation rate, as measured by wholesale prices, inched up to 10.6% yoy in June, from +10.2% in May
and +9.6% in April. This was on account of a pick-up in prices of primary articles, particularly mineral products.
Similarly, the costs of power, fuel and light grew at a faster pace during the month, mainly on account of higher
costs of electricity and mineral oils. These were made worse by a pick-up in the prices of manufactured products.
Inflation will likely worsen in the months ahead, after the government on 25 June allowed prices of gasoline and
diesel to be raised in a move to reduce its subsidies and narrow the budget deficit from a 16-year high. This will
likely complicate the Reserve Bank of India’s monetary policy move given that industrial production slowed
down to the slowest pace in seven months in May. The central bank, in an unscheduled decision on 2 July, raised
its key policy rate for the third time this year and by 25 basis points to 5.5%.

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.

“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 Page 3 of 3
exclusively available for download from www.rhbinvest.com