Background Summary 

Slower magnitude of decline in trades – Malaysia's total trade dropped by 12.6% y/y, milder than the August’s contraction of 19.9% y/y.

Contraction across all the sectors – Exports from the manufacturing sector declined on a year-on-year basis. Even though the year-on-year manufacturing shipments declined, this sector recorded a positive month-on-month growth, increasing by 9.6% m/m.

Lower shipments to major trading partners – From geographical perspective, shipments to major trading partners including China, the US, and ASEAN neighbours (excluding Thailand and Vietnam) declined. These three areas combined form more than half of our export markets.

Our Prognosis 

Exports recovery may take place by early 2024 – Exports are expected to recover by early 2024 on the assumption that the global tech cycle have bottomed while tapering inflationary pressures along major economies implies that monetary policy tightening among major central banks in 2024 is at the tailend.

Slower growth for 2023 – We expect Malaysia’s economy to grow by 4.0% in 2023, and 4.5% in 2024 following exports contraction envisaged for the full year which is also partly explainable by the high-base effect. The downside risk to our outlook is largely stemming from external factors, specifically on the US interest direction and the pace of China’s economy as we step into the year 2024 later.

Source: AmInvest Research - 23 Oct 2023