Economics – Malaysia Macro

Firm prices support exports

Quick Summary

• April’s exports and imports continued to expand at a double-digit pace for the 9 th and 15th straight months respectively. This brings the average first four months of 2022 to 21.7% and 24.2% respectively.

• While our export revenue remains strong, of concern is a drop in global trade volume, masked by the rising inflation notion.

• War-related interruptions to production, sanctions and significantly impaired access to cross-border payment systems will disrupt trade flows with China’s zero-Covid policy (ZCP) forcing us to lower global trade volume by 1.0% to 4.8% for 2022. As for 2023, we have reduced global trade volume by 0.5% to 4.5%.

• Thus, on the back of a high base comparison (26.0% export growth in 2021), we would still maintain our current exports projection of 8% and 10% in 2022. We may review our projections in the coming months.

Highlight

• Despite a high base, imports continued its double-digit growth for the 15th straight month. In April 2022, it surged by 22.0% y/y to RM103.9bil following a record high RM104.9bil reported in March 2022.

• Exports also soared, continuing their double-digit growth for the 9 th straight month. In April 2022, it expanded by 20.7% y/y to RM127.5bil.

• Hence, trade in April 2022 stood at RM231.4bil or a 21.3% y/y gain. This brings the total trade of Jan–April 2022 to RM856.2bil or up 22.9% y/y. Exports swelled by 21.8% y/y or RM84.6bil while imports surged 24.3%y/y or RM75.1bil for the first four months of 2022.

Key takeaway

• The E&E segment supported strongly the export growth, mainly semiconductors. This is attributed to global digitalisation trends. The segment grew by 27.0% in April which brings the YTD average to 27.0%.

• Also, the semiconductor average selling price (ASP) hike as a result of chip shortage continues to be a key driver for growth in the global semiconductor market.

• But overall semiconductor component supply constraints are expected to gradually ease in 2022 and prices will stabilize with an improving inventory situation.

• We expect business activities in this segment to remain a key driver to our export performance in 2022, given that global semiconductor sales are projected to grow by 14% in 2022 (23.6% in 2021) and 4.0% in 2023

• Besides, we foresee earnings from commodities remaining healthy. Export revenue from LNG and crude oil rose by 60.9% y/y and 64.5% y/y respectively. This brings the YTD average growth in revenue to 69.8% and 45.1% respectively.

• Export earnings from palm oil & palm oil-based products climbed by 35.0% y/y or 63.6% YTD while natural rubber export revenue contribution was 16.2% y/y (14.6% avg. YTD) and sawn timber & moulding up by 11.9% y/y (16.7% avg. YTD).

• Meanwhile, imports were supported by:

1. Intermediate goods, up 28.1% (28.8% avg. YTD), maintaining double-digit growth for the 13th straight month;
2. Consumption goods grew 9.7% (20.7% avg. YTD), the slowest growth in seven months;
3. Capital goods however fell 2.4% (+12.9% avg. YTD), the first decline since April 2021.

Source: AmInvest Research - 20 May 2022