PublicInvest Research

Jan 2024 Trade - Export Outlook Brightens

Publish date: Wed, 21 Feb 2024, 12:11 PM
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Malaysia's exports began the year positively, posting a year-on-year growth of 8.7% in January, a notable improvement from the 10.1% decline in December 2023. This was in tandem with the growth in both domestic exports and reexports amid uncertainties in commodity prices during that period. Gross imports edged up by 18.8% YoY in January (2.9% in December 2023). The country's trade surplus edged lower to RM10.1bn in January from RM11.8bn in December 2023.

The country's reliance on the economic fortunes of major players such as the US, China, and the EU poses risks to ASEAN trade. However, we anticipate an improvement this year, supported by the expected global trade recovery and brighter prospects in electronics exports amid tech cycle recovery. Consequently, we forecast Malaysia's goods and services exports to rebound by 5.4% in 2024, with imports growing at 6.8%, though subject to revision if global conditions deteriorate.

January exports. The latest data indicates an improvement in Malaysia's export growth, as reflected in the positve YoY growth of 8.7% in January, compared to a contraction of 10.1% in December 2023. This trend can be attributed to the increase in domestic exports and re-exports within the manufacturing and agricultural sectors. Exports of manufactured goods dominated total exports in January with a share of 84.7%, recorded an expansion of 9.3% YoY in January, attributed to almost all the key subsectors except for E&E.

However, mining goods exports declined by 4.9% YoY in January. The decline was driven by lower exports of LNG, metalliferous ores & scrap metal and condensate & other petroleum oil. Nonetheless, the agriculture goods exports maintained growth trajectory with a double-digit expansion of 17.5% YoY in January. The strong performance was primarily driven by robust exports of palm oil and palm oil-based agricultural products, with all agriculture goods experiencing double-digit export growth. Our in-house projection for crude palm oil (CPO) prices persists unaltered at RM3,800/MT for 2024. We expect steady CPO prices in 2024 due to higher CPO production and stiffer competition from other vegetable oils.

Mixed performance in overseas demand in key markets. Malaysia's exports to its major trading partners showed predominantly positive growth in January, with the exception of China. The United States strengthened and rose by 11.9% YoY in January (-5.3% YoY in December 2023). Meanwhile, exports to Japan rose by 2.8% YoY in January. Exports to the EU edged up by 6.4% YoY in January. Nonetheless, exports to China fell further by 7.4% YoY in January (-1.5% in December 2023), weighed down by lower exports of E&E products.

Imports improved further, supported by all three main categories. Gross imports edged up by 18.8% YoY in January (2.9% in December 2023). Imports of intermediate goods, which are used as an indicator of export performance going forward, improved further by 21.4% YoY in January, from 10.2% in December 2023. Meanwhile, imports of consumption goods turned positive and grew significantly by 25.4% YoY in January (-0.7% in December 2023). Imports of capital goods continue to register double-digit growth at 41.8% YoY in January (+23.7% in December 2023). As a result, the country's trade surplus edged lower to RM10.1bn in January from RM11.8bn in December 2023.


Anticipating a positive trajectory, the 2024 global semiconductor market forecasts a robust recovery, poised for double-digit growth at 13.1%, outstripping earlier projections of 11.8%. This augurs a pivotal juncture for Malaysia's manufacturing sector and the semiconductor industry worldwide. The anticipated upswing is particularly promising for major E&E exporters like
Malaysia, given that exports of E&E products constitute over 40% of the nation's total gross exports. Furthermore, the Ministry of Finance anticipates a substantial 5.5% increase in manufactured goods exports for 2024, further underpinning the optimistic sentiment.

However, Malaysia's vulnerability to global economic fluctuations, particularly in electronics and semiconductor sectors, is underscored by anticipated modest global economic growth in 2024. Heavy reliance on key trade partners like the US, China, and the EU heightens concerns for ASEAN trade. Additionally, the major elections in significant trading partners this year, including the US, South Korea, and India, introduce further complexity, potentially shaping international trade dynamics. The escalation of the Red Sea Crisis poses a significant threat, potentially disrupting global supply chains and elevating business costs. Despite these risks, an anticipated uptick in electronics exports and favourable base effects could partially offset negative impacts. As such, we forecast Malaysia's exports of goods and services to rebound with a growth rate of +5.4% in 2024.

The World Trade Organization (WTO) projects a 3.3% expansion in global trade for 2024, aligning with a steady 2.5% global GDP growth rate. While trade may lag behind GDP in the preceding year, it is expected to surpass it in 2024, reflecting the influence of business-cycle sensitive investment and durable goods. Forecast risks include a possible slowdown in China and resurgence of inflation in advanced economies, potentially requiring prolonged higher interest rates. Conversely, if inflation declines rapidly, allowing for an early shift from contractionary monetary policies, growth could exceed expectations.

Source: PublicInvest Research - 21 Feb 2024

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