• We believe Malaysia's exports are being supported by trade prices and volume in August but expect some external headwinds and domestic challenges going forward.

Exports continued its double-digit growth for 24 consecutive months

Highlights

Malaysia’s overall exports grew robustly by 48.2% y/y, and imports grew by 67.6% y/y.

The external trade continued to show robust growth in August 2022. Overall trade surged by 56.7% y/y, bringing total trade to RM265.7 bil.

Strong trade data was supported by robust exports which grew by a whopping 48.2% y/y, bringing total exports to RM141.3 bil. Thus, the average export growth for the eighth month to 30.2%.

The demand for Malaysian goods is very high at the moment, and local companies are also aggressively promoting local products abroad.

It is reflected with the higher exports shipments of electrical and electronic (E&E) products, petroleum products, palm oil and palm oil-based agriculture products, liquefied natural gas (LNG) as well as optical and scientific equipment.

And the August data showed our exports of petroleum products, LNG, as well as optical and scientific equipment reported the highest monthly value.

We expect growing external demand to drive overall exports growth this year, and the firm imports growth will continue on the back of continued improvement in domestic economic activities.

Imports grew by 67.6% y/y bringing the total imports to RM124.4 bil. This brings the average imports growth throughout the year to 36.6% y/y.

Imports were supported by intermediate goods (56.1 % y/y growth), consumption goods (43.1% y/y), and capital goods (23.7% y/y).

But we opine the uncertainties in the global landscape might taper the upward momentum of the trade performance. Early signs of potential slowdown is seen in the manufacturing sector where new orders for exports are softening. And commodity prices are also easing.

Slower global growth could hurt Malaysia's trade outlook. Risks could come from weaker global demand amid rising global inflation, a possible sharp slowdown in the US due to aggressive monetary tightening and a shortage of raw materials or supply chain disruption, besides weak recovery in China following the Covid-19 lockdowns there earlier this year.

We expect Malaysia’s exports to register a full-year growth of 24% - 25% with slower export growth expected sometime later in 2H2022, affected by a bleaker global economic outlook. But with the average Jan-Aug at 30.2%, to achieve our 2022 projection, the balance 4 months average exports would be around 11% - 13%. This seems within striking distance.

Our upside to exports growth this year is 26% - 27%. To achieve our projection, we need an average growth of 18% - 21% for the next four months. We maintain our exports forecast at 24% - 25% while imports around 26% - 27%.

Source: AmInvest Research - 21 Sept 2022