The continued recovery in external demand amid a low-base effect pushed April’s exports reading to its fastest growth since March 1998, up 63.0% y/y (Mar: 31.0% y/y). Imports grew 24.4% y/y in April (Mar: 19.2% y/y). The trade surplus narrowed to RM20.5bil (Mar: RM24.2bil).

The reimposition of tighter domestic restrictions from 1 to 14 June is a temporary setback to the economy as export-oriented industries will also feel the brunt. However, we expect the export-oriented sector to rebound faster post-phase 1 of the MCO given the improving global demand and expectations of a better domestic vaccination rate. For now, we maintain projection for our exports and imports to grow by 15% and 13%, respectively.

• The continued recovery in external demand amid a low-base effect pushed April’s exports reading to its fastest growth since March 1998. It grew by 63.0% y/y (Mar: 31.0% y/y), 0.9% m/m (Mar: 19.8% m/m), and above the RM100bil mark at RM105.6bil (Mar: RM104.9bil). This brings the year-to-date export growth to 29.6% y/y, which is well above our projection of around 15%.

• The robust exports print was driven by the recovery in the commodity segments, led by agriculture exports, up 66.9% y/y (Mar: 43.8% y/y). We saw solid demand almost across the board i.e. palm oil (Apr: 46.8% y/y; Mar: 8.6% y/y); sawn logs (Apr: 202.9% y/y; Mar: -50.8% y/y), sawn timber & mouldings (255.0% y/y; Mar: 12.8% y/y), and other agriculture exports (April: 48.6% y/y; Mar: 18.6% y/y).

• The mining sector posted a notable recovery, up 24.5% y/y (Mar: -24.1% y/y), marking the first positive growth in 22 months supported by crude petroleum (Apr: 37.1% y/y; Mar: 27.2% y/y); and condensates and other petroleum oil (Apr: 2,325% y/y); and metalliferous ores and metal scrap (Apr: 77.2% y/y).

• The demand for manufacturing exports remains solid, up 65.5% y/y (Mar: 35.5% y/y) underpinned by healthy E&E products (Apr: 43.1% y/y; Mar: 48.0% y/y) and resource-based manufacturing exports i.e. rubber products (Apr: 207.2% y/y; Mar: 210.6% y/y), chemicals & chemical products (Apr: 39.4% y/y; Mar: 32.3% y/y), and manufactures of metal (Apr: 180.7% y/y; Mar: 88.4% y/y).  Meanwhile, imports grew 24.4% y/y in April (Mar: 19.2% y/y) supported by intermediate (Apr: 64.4% y/y) and consumption goods imports (Apr: 29.9% y/y), which were more than enough to mitigate the decline in capital goods imports (Apr: -38.2% y/y). The contraction in capital goods imports was due to the one-off higher demand for floating structures in April 2020.

• The reimposition of tighter domestic restrictions from 1 to 14 June is a temporary setback to the economy. Export oriented industries will also feel the brunt due to operations and/or transportations restrictions as well as disruption in the domestic supply chain.

• However, we expect the export-oriented sector to rebound faster post-phase 1 of the MCO given that the global demand for Malaysia’s key export products and trading partners remains fairly strong. Unlike a year ago, our vaccination rate is set to improve in the coming months.

• Nevertheless, we remain cautiously optimistic that the business operation environment could be restored fairly quickly, assuming another round of targeted stimulus measures are injected and a gradual phase-out of containment measures in early 2H2021. For now, we maintain our projection of exports and imports to grow by 15% and 13%, respectively.

Source: AmInvest Research - 31 May 2021