February’s export contracted 2.0% y/y, the first contraction since October 2016. Meanwhile, imports fell 2.7% y/y. Still, the economy registered a trade surplus of RM9.0bil. The drop was due to shorter working days added with the Chinese New Year festive season and a high base.

Despite the poor showing of exports, we believe exports will rebound in upcoming months and project the full-year average at 8.5%. It will be supported by firm commodity prices, moderate growth from E&E and resource-based and healthy global growth and trade. But the high base will impact exports to some degree. Also, the trade war will inflict some headwinds through the major trading partners i.e. China and the US.

• February’s export contracted 2.0% y/y from a rise of 17.9% y/y in January, the first contraction since October 2016. At the same time, imports fell 2.7% y/y after climbing 11.6% y/y in January. Meanwhile, trade surplus in February was RM9.0bil. The drop was due to shorter working days added with the Chinese New Year festive season and high base.

• Imports were supported by consumption goods, up 12.6% y/y in February due to the Lunar New Year celebrations. Capital goods rose 6%y/y driven by higher imports of industrial transport equipment, particularly aircraft and parts which indicate rising activity and confidence in the tourism industry. However, intermediate goods declined 14.7% y/y.

• Despite the poor showing of exports, we believe exports will rebound in upcoming months and project the full-year average at 8.5%. It will be supported by firm commodity prices, moderate growth from E&E and resource-based and healthy global growth and trade. But the high base will impact exports to some degree. Also, the trade war will inflict some headwinds through the major trading partners i.e. China and the US.

Source: AmInvest Research - 6 Apr 2018