-  Malaysia registered robust trade performance during the start of 2014. The softer growth in the domestic environment is expected to be compensated by vast improvement in net trades during 1Q14.

-  On a YTD basis, exports/ imports/ trade balance registered +12.3%/ 8.3%/ RM16.79bil respectively. On a YoY comparison, net trades rose by RM5.32bil as of YTD February which could potentially enhance GDP growth in 1Q14.

-  During the month of February, Malaysia’s overall exports increased by a healthy 12.3% YoY to RM58.91bil. Imports grew by 9.5% to RM48.48bil. As such, trade balance registered a healthy surplus of RM10.44bil in February.

-  Ahead of the 1Q14 GDP statistical release on 16 May, we envisage the Malaysian economy to advance by 4.7% YoY (4Q13: +5.1%).

-  In terms of real GDP, our estimate suggests that net trade would contribute 1.5ppts to growth in 1Q14. The percentage point contribution of net trade to overall growth was -1.0ppt in 4Q13 as imports grew at a stronger pace than exports during the quarter.

-  China contributed 13.5% and 16.4% to Malaysia’s total exports and imports, respectively, in 2013. In terms of annual growth in 2013, Malaysia’s exports to China expanded by 9.3% to RM96.97bil while imports from China grew by 15.7% to RM106.26bil.

-  Owing to the large contribution of trades with China, Malaysia’s trade performance could be adversely affected as China’s economy slows.

-  China advanced by a moderated 7.4% in 1Q14 owing to challenges on both the domestic and international fronts (4Q13: +7.7%). Based on the statistical release for GDP last week, the National Bureau of Statistics of China indicated that exports growth will probably be restrained by the volatile external environment.

-  As of YTD March 2014, China’s overall exports slipped by 3.5% YoY while imports rose 2.0% YoY. As such, trade balance had reduced by USD26.96bil from a year ago to amount to USD16.59bil as of YTD.

-  Aside from that, China’s manufacturing PMI continues to grow at a modest pace during 1Q14 despite improvements in the advanced economies.

-  The JP Morgan Global Manufacturing index stood at 52.4 points in March, which was mainly driven by the growth in the US and Eurozone. Meanwhile, China’s manufacturing PMI registered 50.3 points (or +0.1 points MoM) in March.

-  All in all, we note that a 5.0% decline in Malaysia’s total net exports in nominal value could shave off about 0.7ppt from our real GDP growth estimate for 2014. 

Source: AmeSecurities