Economic Highlights

• Exports increased 38.0% y/y to RM134.1bil (June 2022: 38.7% y/y) while imports expanded 41.9% y/y to RM118.6bil (June: 41.9% y/y), which brings the total trade for the month up to RM252.6bil from RM180.7bil, a 39.8% y/y growth.

• On a year-to-date basis, exports have posted a 27.8% y/y growth compared to the same period in 2021, and imports have chalked up 32.5% y/y.

• We maintain our full year export growth projection at 24%– 25%.

Highlights

Malaysia trade figure has somewhat lost its steam in July compared to June. Exports increased 38.0% y/y to RM134.1bil (June 2022: 38.7% y/y) while imports expanded 41.9% y/y to RM118.6bil (June: 49.2% y/y), which brings the total trade for the month up to RM252.6bil from RM180.7bil, a 39.8% y/y growth.

Nonetheless, these figures exceeded market expectations as the market forecasted exports and imports to grow by 36.5% and 40.4%, respectively. Including July’s showing, Malaysia’s external trade has been beating market consensus for the fifth straight month, signalling a still healthy global demand.

On a year-to-date basis, exports have posted a 27.8% y/y growth compared to the same duration in the year 2021, and imports have chalked up 32.5% y/y. On a monthly basis, exports contracted by 8.2% m/m, imports by 4.5% m/m, and trade balance by 29.1% m/m.

Sector-wise, exports of manufactured products contributed greatly to the headline growth. It grew 35.4% y/y in July, faster than the 33.8% y/y in June 2022. It was driven by E&E products which rose 35.2% y/y, petroleum products at 80.3% y/y, and machinery, equipment & parts at 56.9% y/y). Other sector products such as mining, and agriculture were also on the upside with the former surging 100.4% y/y (June 2021: 116.3% y/y) while the latter rose 24.1% y/y (June 2021: 46.8% y/y).

Changes in imports were driven by the increase in intermediate goods of 32.2% y/y (June 2021: 46.9%), followed by capital goods at 29.6% y/y (June 2021: 30.4%), and consumption goods at 33.2% y/y (June 2021: 25.6%).

Key Takeaways

Despite Malaysia’s still strong trade performance, we are seeing more and more downside risks. Firstly, an escalating tension between the US and China over Taiwan will significantly impact the global economy, considering that China is a manufacturing powerhouse linked to economies everywhere, while Taiwan holds the lion share in global semiconductor manufacturing.

Aside from that, as more central banks take further steps in tightening their monetary policy, we think that the global economy growth will slow down alongside with global trade volume as global economic activity will be constrained by restrictive financial conditions. For 2022, we expect the global trade volume to slow to 3.5% from 10.1% in 2021.

This is also reflected in the recent PMI reading where new export orders among manufacturers declined for the first time since March. Some companies such as Micron Technology, Nvidia Corporation, Intel Corporation and etc. have already warned of the same moving forward.

As such, we are seeing Malaysia’s external trade slowing down over the next coming months, attributed to the weakening global demand. Also, as the global supply chain disruption improves, we think that goods inflation will also ease, constraining gross exports and imports’ growth. We maintain our full year export growth projection at 24%–25%.

Source: AmInvest Research - 22 Aug 2022