- Exports surged by 4.1% YoY in August. Overseas shipment expanded by 4.1% YoY to RM63.9bil in August (July: +3.5% YoY). In part, the weak Ringgit currency remained supportive of exports growth during the month. Overseas shipments were driven by most export products except petroleum, including crude petroleum (-40.6% YoY), LNG (-42.3%), and petroleum products (-7.1%). Mostly, exports growth was supported by E&E, which surged by 16.7%. In terms of export markets, exports grew on the back of healthy demand from China (+32.4% YoY), the US (+24.2%) and Thailand (+16.1%).

- Imports contracted by 6.1% in August. As for the imports segment, both capital (-14.0% YoY) and intermediate goods (-13.6%) fell sharply following positive growth rates in the preceding month. Total imports contracted by 6.1% to RM56.3bil in August (July: +5.9%), partly due to the weak Ringgit currency. For the intermediate imports, the decline was attributable to industrial supplies, and parts and accessories for E&E. On the other hand, capital goods imports fell on lower demand for transport equipments. That said, consumption imports continued to grow, although at a moderated pace of 13.7% vs. +25.7% in July.

- Trade balance registered a healthier surplus of RM10.2bil. Total trade fell by 0.8% YoY to RM122.9bil in August (July: +4.7% YoY). Also, trade balance registered a healthier surplus of RM10.2bil in August, due to the contraction in imports. On a YTD basis, net trades had advanced by 3.9% YoY to RM54.2bil. That was despite the contractions in both exports and imports of -2.0% and -1.4%, respectively.

- Weak Ringgit is positive for exports. Overall, exports growth and healthy trade balance in August were partly supported by the weak Ringgit currency. The Ringgit weakened by about 25% YTD against the greenback and has been the weakest currency compared to other regional currencies. On the other hand, as imports growth is unlikely to be as strong as the advancement in exports due to the weak Ringgit currency, net trades will continue to remain in surplus.

- Weak global oil prices as at YTD. Throughout this year, all three major export segments including petroleum products, LNG and crude petroleum have been contracting amid weak global prices and low exports. Cumulatively, the three segments account for 14.7% of total exports. Hence, a sustainable recovery in the US augurs well for Malaysia’s exports growth as global oil prices trend higher.

Source: AmeSecurities Research - 8 Oct 2015