Trading activities declined in May

Malaysia's total trade declined by 2.0% y/y (April 2023: 14.5% y/y) to RM223.8 billion, with exports falling by 0.7% y/y (April 2023: -17.6%) to RM119.6 billion and imports declined by 3.3% y/y (April 2023: 11.1% y/y) to RM104.2 billion. The trade surplus widened to RM15.4 billion (April 2023: RM12.8 billion). For the first five months of 2023, exports now declined by 1.7% on average, and imports declined by 0.3% on average.

On a month-on-month basis, both exports and imports increased by 13.7% m/m and 12.6% m/m respectively, an improvement after the sharp contraction back in April 2023.

Contraction across all key sectors

Shipment of agriculture products declined by 30.9% y/y (April 2023: -29.2% y/y), while shipment of manufacturing increased by 1.8% y/y (April 2023: 15.5% y/y) and mining by 5.9% y/y (April 2023: 30.9% y/y). On a month-on-month basis, all three sectors recorded positive growth with agriculture grew by 3.2%, manufacturing by 12.5%, and mining by 43.7%.

Shipments to major trading partners increased, including to Singapore (+6.8% y/y), China (+1.5% y/y), and the US (+14.9% y/y).

Contraction in key sectors

By end use, imports of intermediate goods declined by 12.3% y/y (April 2023: 24.2% y/y). However, imports of consumption goods increased by 4.5% y/y (April 2023: 1.6% y/y), and imports of capital goods increased by 13.7% y/y (April 2023: 11.8% y/y).

Our take

The slight improvement in trade numbers reflect to seasonal factors, due to festivity season back in April 2023. Nonetheless, the overall trend shows that trade numbers continue to be much slower relative to last year’s performance. We are expecting slower trading activity for the remainder of the year, given the pessimistic economic outlook globally. The effect from the higher interest rates and slower demand are already noticeable with trade performance across major trading partners including the US, China, and Singapore, that currently contributes around 40.8% of Malaysia’s overall exports has been disappointing since the early of the year. Furthermore, global manufacturing PMI and the PMI of the mentioned countries also remained under the contractionary level.

On the domestic front, the latest manufacturing PMI as of May 2023 remains under the contractionary level and it has been so since September 2022. The PMI survey points to weakness in output and new orders across both the local and external front. We expect GDP for Malaysia to be at 4.5% for 2023, mainly supported by domestic factors including the labour market, continuous investments realisation and the improvement in the tourism sector.

Source: AmInvest Research - 21 Jun 2023