Investment Highlights

- Malaysia’s net trades have improved to RM2.45bil in May as compared to an upward revised RM1.04bil in the preceding month. Nevertheless, exports in May had registered the fourth consecutive month of contraction due to weak external environment. Exports fell by 5.8% YoY (or -0.8% MoM) during the month vs. ours and street estimates of 4.7% and 3.0% respectively. On the other hand, imports had also fallen by 2.3% YoY (or -3.4% MoM) which resulted to a boost in terms of net trades during the month of May.

- In terms of composition of exports, the manufactured goods, which represented 71.8% of total exports, saw a marginal increase of 0.1% YoY in May. Particularly, the contraction of the E&E segment had narrowed to -2.2% in May from -3.8% in April and from as high as -15.3% in February this year. On the other hand, the YTD exports of manufactured goods had also posted a decline of 2.2% led by the fall in E&E (-4.1%).

- As of YTD, total exports fell by 3.3% on the back of weak global sentiments (YTD May 2012: +3.3%). Meanwhile, imports expanded by 5.0% YoY (YTD May 2012: +8.8% YoY) and total trade balance had registered a surplus of RM19.84bil (YTD May 2012: RM41.89bil).

- Despite improved economic conditions in the US, trade numbers have not reflected the rebound in terms of shipments to the US during the month of May. However, net trades with the US had registered a healthier surplus during the month. As shipments to the US contracted by 3.4% while imports had declined by 9.6%, thus net exports to the US had amounted to RM1.1bil in May (April: RM469.3mil). YTD trades with the US have posted exports/ imports/ trade balance of -2.8% YoY / 1.9% YoY / RM3.66bil respectively.

- Aside from that, the monetary policy relaxation in Japan had caused the weakening of the JPY currency during the month of May to averagely 100.99 (or -3.3% MoM). On the YTD basis, exports to Japan fell by 8.6%; imports contracted by 11.1%; while trade surplus had amounted to RM9.58bil. However, with the improved economic conditions in Japan, we do foresee some uptick in trades with Japan going forward.

- Elsewhere, a slowdown in China has caused a drag to overall exports considering that Malaysia continues to register trade deficits with China since September last year. As of May 2013, YTD bilateral trades with China have posted exports/ imports/ trade balance of -2.5% YoY / +15.2% YoY / RM7.12bil respectively.

- Meanwhile, a patchy recovery in some parts of Europe and uncertainties in the other debt stricken economies within the region has resulted in weaknesses for exports to Eurozone. As of May 2013, YTD bilateral trades with EU posted exports/ imports/ trade balance of -5.6% YoY / +11.2% / RM3.85bil respectively.

- As for the imports segment, the decline was mainly due to the contraction in intermediate goods (-6.6% YoY) and capital goods (-12.2% YoY) in May. Owing to the relatively stronger Ringgit currency in May, the imports of consumption goods have improved by 6.6%. On YTD basis though, we gather that the imports of intermediate/ capital/ consumption goods had registered -0.7%/ +4.7%/ +3.5% YoY respectively. Note that the Ringgit had appreciated by about 1.0% MoM to averagely 3.019 per USD in May.

- The dreary trade numbers are in line with the weak economic performance in advanced economies and slowdown in China. On the back of the lacklustre global demand, commodity prices are likely to remain suppressed as well. On the flipside, growth catalyst will mostly come from the sooner than expected rebound in the US thus bolstering optimism for an uptick in global demand during 2H13.

Source: AmeSecurities