China's exports and imports fell by 8.7% y/y and 10.6%y/y in November, respectively, after contracting by 0.3%y/y and 0.7%y/y in October.
Looking at the data, China's exports to ASEAN, which is now the main export destination grew by 2.9%y/y in November. But to the US it plunged by 13.2%y/y in November.
Although China’s exports to ASEAN is positive, we must remember that this region is more of a joint supply chain than a final goods export destination.
And the final exports to the US and Europe were weak, especially exports to the US. This could mean that inventory will start to pile up as final goods sales were weak.
Imports from Taiwan contracted by 10.4% y/y in November dragged by parts and raw material imports to produce E&E. If we were to use this as our basis for China’s potential exports, it suggests their exports will be weak, reporting negative growth.
With the E&E segment expected to be weak, this may have some impact on the Malaysian companies who are part of the China’s supply chain in this segment.
For instance, smartphone exports fell by 9.6% y/y in November. This could be partly due to supply disruption in China and more of weak demand in the US and Europe.
This suggests the Malaysian semiconductor players who rely on China’s supply chain in the area of consumer electronics are likely to experience some headwinds going forward mainly due to weak demand.
But for those local Malaysian companies who have started to diversify their exposure into EV’s where we see stronger potential growth over the next five years, they will be more likely to cushion any adverse shocks coming from the slower demand from China especially in the area of consumer electronics.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....