• For the month of June, overall exports jumped by 38.8% y/y, bringing total exports to RM146.2bil. Imports also increased by 49.3% y/y, bringing the total to RM124.2bil.

• This brings total trade up by 43.4% y/y to RM270.4bil, and the trade surplus widened to RM21.9bil in June from RM12.7bil in May.

• We expect Malaysia’s exports to continue growing by around 25%–26%, driven by higher demand of E&E products and the full reopening of the economy. Nevertheless, downside risks remain with drawbacks in commodity prices, shortages of labour and China’s stringent zero-Covid policy will constraint full potential of Malaysia’s external trade.

Highlights

The external trade continued to show a robust growth halfway into 2022. For the month of June, overall exports increased by 38.8% y/y, bringing total exports to a record high of RM146.2bil.

This brings average exports growth for the first six months of the year to 25.9%, in line with our exports’ growth projection of around 25%–26% this year.

The manufacturing sector, which covers 84.1% share of total exports, contributed to the export growth with a 33.8% y/y rise, supported by the stronger demand of E&E products (40.9% growth, or by RM15.2bil), petroleum products (104.1% growth or RM9.9bil), and machinery, equipment & parts (35.0% growth or RM1.4bil).

Overall imports also surged by 49.3% y/y, bringing the total to RM124.2bil.

Specifically, it was supported by intermediate goods (46.9% y/y growth), consumption goods (25.6% y/y), and capital goods (up by (30.4% y/y).

As a result, total trade expanded 43.4% y/y to RM270.4bil, and the trade surplus widened to RM21.9bil in June from RM12.7bil in May.

Key Takeaways

Overall exports and imports continued to grow at a double-digit pace. But this was mainly driven by the price factor. Looking at volume, exports only rose 6.9% y/y in May (2022 year-to-date average: 4.3%).

Imports’ volume grew by 21.7% y/y in May (2022 year-to-date average: 15.95%). This suggested a robust demand from the domestic economy. Exports of E&E will remain strong for the rest of the year. Global semiconductor sales were up by 19.0% y/y in May (2022 year-to-date average: 20.0%), which is above of the forecast of 16.3%.

Exports to China, which is one of the largest trading partners, was on a downward trend, growing by only 4.2% in June, compared to 10.1% y/y in May (2022 year-to-date average: 14.4%). As for commodities, shipments of manufactured products to China declined by 37.2%. This was due to the effect from the zero-Covid policy.

Latest Malaysia’s PMI slightly improved to 50.4 in June from 50.1 in May, still above the expansion level. Higher input costs and a shortage of workers were the main concerns raised by businesses in the latest survey.

Adding to that, a retreat in commodity prices, including Brent and palm-oil, and labour shortages will also be the downside risks for Malaysia’s external trade. Nonetheless, we maintain our full year export growth projection of 25% - 26%.

Due to the high imports’ value, retained imports value was down 4.0 in June from 4.6 in May to.

For the full year of 2022, our base-case growth projection remains unchanged at 5.6% with an upside of 6.0% while our downside is at 4.8%.

Source: AmInvest Research - 21 Jul 2022