Exports surpassed the RM100 billion mark for the first time in February — rising by 16.8% y/y to RM102.27 billion. We expect exports to grow 8%–10% in 2022 despite a high base comparison (26.0% exports grew in 2021). It will continue to benefit from strong global semi-conductor demand due to increasing digitalisation despite some headwinds expected from supply disruptions in relation to the Ukraine conflict and recent China lockdowns. Also, firm commodity prices plus healthy FDI and the ramification of RCEP should further support exports.

Malaysia's Exports Remain Healthy

Highlights

• Total trade rose 17.5% y/y to RM184.8 billion in February 2022, bringing the total trade for the first two months to RM388.3 billion, compared to RM319.9 billion in January– February 2021.

• Importantly, exports surpassed the RM100 billion mark for the first time in the month of February, climbing 16.8% y/y to RM102.27 billion. Average exports grew by 20.4% y/y for the first two months of 2022.

• The drivers for the solid exports performance are:
  1. Strong shipments of electrical and electronic (E&E) products that are benefiting from the digitalization trend ramped up by the pandemic.
  2. Chemicals and chemical products and the manufacture of metal.
  3. Palm oil and palm oil-based agriculture products which were supported by higher prices of crude palm oil (CPO) averaging at RM5,945 per tonne.
  4. Growing exports of liquefied natural gas (LNG).

• Imports also expanded by 18.4% y/y to RM82.5 billion. The average imports grew by 22.6% for the first two months of 2022. The drivers of imports are:
  1. Capital goods, which grew by 4.4% y/y to RM7.9 billion, albeit being the slowest growth since April 2021.
  2. Intermediate goods, which advanced 21.8% y/y to RM46.7 billion, marking a straight eleventh month of double-digit growth.
  3. Consumption goods increasing 18.3% y/y RM6.97 billion.

Key Takeaways

• The E&E segment of our exports is expected to contribute positively. It will benefit from the positive outlook of global semiconductor sales forecast at 8.8% y/y for 2022 (26.2% y/y) as chip makers continue to build up production capacity to meet demand.

• While major semiconductor manufacturers such as Taiwan Semiconductor Manufacturing, Samsung Electronics Co and Intel Corp have announced billions of dollars in investments for new factories in 2021, the digitalization trend ramped up by the pandemic would continue to further drive demand.

• We believe in the foreseeable future, there will huge demand, and global semiconductor players will be very aggressive in plant construction. Malaysia is expected to be one of the potential beneficiaries, thanks to the approval of manufacturing investment by MIDA in 2021 to be around RM220 billion with semiconductors playing a key role.

• However, the bright outlook from this segment is expected to face some headwinds from the ongoing Ukraine conflict plus the new lockdowns in China. It will have some impact on the global supply chain. That may cause some delays in companies meeting their order deliveries.

• In the meantime, our exports will continue to enjoy the firm commodity prices where Brent is envisaged to average US$89 a barrel in 2022 and CPO at RM4,500 per tonne.

• We should potentially benefit from the RCEP with better market access and trade facilitation. Thus, on the back of a high base comparison (26.0% exports grew in 2021), we expect exports to grow between 8% and 10% in 2022.

Source: AmInvest Research - 21 Mar 2022