• Exports surged by 14.0% yoy; imports rebounded to 9.1% yoy in April
• Trade surplus narrowed to RM13.1bn
• Higher exports driven by manufacturing sector
• Regional exports data signals optimism
• External trade performance will continue expanding at a steady pace

Malaysia’s export surged by 14.0% yoy to RM84.2bn in April from 2.2% in March. It bounced back to record a double-digit growth which was last seen in January 2018. The increase was mainly driven by manufacturing sector. Imports rebounded to 9.1% yoy to RM71.2bn in April after declining for two consecutive months (Mar: - 9.6%; Feb: -2.8%). Thus, the trade surplus narrowed to RM13.1bn in April, making it the 255th consecutive month of trade surplus since November 1997.

On monthly basis, exports contracted 0.3% in April after an outstanding growth in the prior month (Mar: 20.1%). Whereas, imports rose by 2.0% mom in April following a 13.8% rise in March. On seasonally adjusted terms, exports climbed by 9.5% (Mar: 3.5%) while imports rallied to 8.8% (Mar: -2.1%).

Total trade in April 2018 recovered to 11.7% yoy to RM155.4bn as compared to RM139.1bn in the corresponding period of last year. For the first four months of 2018, total trade amounted to RM597.3bn, grew by 4.9% yoy. Exports increased by 7.8% to RM321.9bn while imports grew by 1.6% to RM275.4bn. Trade surplus picked up by 68.7% to RM46.4bn compared to the corresponding period of 2017.

Higher exports driven by manufacturing sector

Exports registered a robust growth of 14.0% yoy in April to RM84.2bn. This was the second highest monthly exports value after the previous month’s exports of RM84.5bn. The double-digit growth was mainly driven by manufacturing sector and supported by better performance in mining sector.

Exports of manufactured goods increased by 16.8% yoy in April (Mar: 3.7%; Feb: 1.5%) to RM70.5bn and accounting for 83.7% of Malaysia’s total exports. The stronger growth was impelled by an increase of exports in the main components of manufacturing goods; electrical and electronic (E&E) products (Apr: 21.2%, Mar: 8.8%), petroleum products (Apr: 16.7%, Mar: -24.6%), chemical products (Apr: 17.8%, Mar: -21.0%) and metal (Apr: 42.8%, Mar: 17.6%). These four major components, collectively contributing 56.4% of total exports. Exports of E&E products were recorded higher, valued at RM31.8bn whilst petroleum products stood at RM6.39bn.

Export of mining goods which held 8.0% share over total exports expanded by 4.2% yoy to RM6.8bn, primarily driven by a rise in the export of crude petroleum. Exports of crude petroleum continued to post double digit growth in April which increased by 22.7% yoy (Mar: 18.4%) or RM3.6bn and accounting for 3.4% to the total exports. Nonetheless, exports of liquefied natural gas (LNG) declined for third consecutive months (Apr: -12.5%, Mar: -3.3%, Feb: -11.8%).

Exports of agriculture goods, which accounted for 7.1% of total exports, down by -4.8% yoy (Mar: -11.2%) to RM6.0bn, mainly due to lower exports of palm oil which fell by 0.8% yoy to RM3.7bn (Mar: -7.0%). Shipments of other products; natural rubber, sawn timber and mouldings also decreased in April while saw log picked up to 8.6% yoy (Mar: -47.4%).

Increase in import growth was propelled by capital good

• Capital goods, valued at RM8.4bn or 11.8% of total imports, increased by 4.8%, due to the rise transport equipment and industrial. However, capital goods (except transport equipment) dropped 4.3%

• Intermediate goods, valued at RM33.8bn or 47.5% of total imports, declined 11.9%, following a decrease in imports of parts and accessories of capital goods (except transport equipment). In contrast, processed fuel & lubricants and parts & accessories of transport equipment rose by 78.5% and 16.4% respectively.

• Consumption goods, valued at RM5.6bn or 7.8% of total imports, fell by 1.8%, because of a decline imports of semi-durables, non-durables and primary food and beverages mainly for household consumption.

Performance of major markets

Trade with ASEAN rose by 11% yoy to RM41.4bn and accounted for 26.6% of Malaysia’s total trade. Exports amounted to RM23.9bn, an increase of 13.6%, led by increase in exports of transport equipment, petroleum products and E&E products. Imports from ASEAN expanded by 7.7% to RM17.5bn. Exports to Singapore rose by RM386.1m whilst exports to Thailand expanded by RM1.3bn.

Exports to China amounted to RM12.4bn, which increased by 22% led by higher exports of E&E products as well as chemicals and chemical products. Imports from China were up by 11.2% to RM13.9bn. Overall, trade with China which absorbed 16.9% of Malaysia’s total trade expanded by 16.1% yoy to RM26.3bn compared to a decline of 12.5% in the previous month.

Trade with the EU increased by 25.1% yoy to RM16.2bn and accounted for 10.4% of Malaysia’s total trade. Exports totalled RM8.9bn, higher by 19.5% mainly due to increased exports of manufactures of metal as well as E&E products. Imports grew by 32.8% to RM7.2bn.

Exports to the US totalled RM7.5bn, increasing by 1.7% yoy on the back of higher exports of transport equipment, petroleum products as well as optical and scientific equipment. Imports rose marginally by 0.6% to RM5.3 billion. Trade with the US in April 2018 recorded a growth of 1.2% to RM12.8bn or 8.2% of Malaysia’s total trade.

Trade with Japan, which constituted 6.8% of Malaysia’s total trade or RM10.6bn, contracted by 7.6% yoy. Exports were lower by 21.4% to RM5.0bn, owing mainly to lower shipments of LNG, while imports increased by 9.6% to RM5.58 billion.

Regional exports data signals optimism

String of regional trade data revealed better export numbers despite risks from rising protectionism and volatile markets. China’s exports rebounded to strong positive growth in April from the unexpected contraction in March. In USD terms, exports rose 12.9% yoy (Mar: -2.7%). The trade balance also returned to surplus of USD28.78bn (Mar: – USD4.98bn), from its first deficit in 13 months in March. However, for now, the key risk is still on the US-China trade tensions.

ASEAN exports picked up in April and Malaysia recorded the highest growth among other countries. Thailand exports grew 12.34% yoy, higher than March’s 7.06% yoy. Indonesia’s exports in April 2018 reached USD14.5bn (+9.0% yoy) following an upwardly revised 6.2% rise in the previous month. Singapore’s non-oil domestic exports (NODX) rose 11.8% yoy in April, reversing the downwardly revised 3.2% yoy contraction recorded a month ago. April’s NODX growth was supported by the robust expansion in the non-electronic exports segment, which offset a decline in electronics exports. Elsewhere in the region, Taiwan export growth remained solid at about 10% yoy in April whilst exports from South Korea increased by 13.5% yoy in May after a 1.5% fall in the prior month. The positive exports data suggests that trade flows remained undisrupted despite the recent increase in protectionism, geopolitical risks and financial market volatility.

External trade performance will continue expanding at a steady pace

Exports in April 2018 registered a robust growth of 14% yoy, an improvement from the sub-par performance over the past two months. The previous two months’ figures were weighed down by seasonal effects and a stronger ringgit. Since then, the ringgit has weakened in April and seasonal effects have dissipated, which together provide some impetus to export performance. Meanwhile, import growth also expanded strongly by 9.1% yoy.

Regional PMI indicates promising outlook. Business confidences in emerging economies as well as ASEAN have been on an uptick. ASEAN manufacturing growth gained further momentum midway through the second quarter, with the headline Nikkei ASEAN Manufacturing PMI reached the highest level since July 2014. The headline PMI rose from 51.0 in April to 51.5 in May, signalling a fifth monthly improvement in the health of the sector. May data showed six of the seven countries covered by the survey indicating an improvement in manufacturing conditions. Malaysia was the only country signalling a decline in the performance of its manufacturing sector, with the pace of deterioration the steepest for nearly a year. Malaysia’s manufacturing condition declined for the fourth month in May, as poor demand dragged the manufacturing PMI to 47.6 (Apr: 48.6). Despite weak manufacturing activity in May, the change in the Malaysian government lifted sentiments and manufacturers’ optimism. As a result, business sentiment sustained above historical average and manufacturers retained a strong output projection in 2018. The declining trend in Malaysia’s PMI is mainly due to pre-GE14 factor. We expect the PMI figure to improve after GE14 amid of zero-rated GST, stable retail fuel price and stable global demand.

Meanwhile, short-term prospects for the world economy have generally improved over the last six months. According to the United Nations World Economic Situation and Prospects released this month, global economic growth is expected to reach 3.2% in both 2018 and 2019. Therefore, we foresee regional demand in 2H18 stays on intact and solid, thus will support expanding regional as well as global trade activities. Henceforth, we predict global trade activities to remain on an upbeat momentum, albeit at a moderating rate amid unfavourable base effects. Nevertheless, protectionism threat remains as a crucial global downside risk.

We foresee Malaysia’s external trade performance will continue expanding at a steady pace in 2018, buoyed by continuous upbeat momentum in global trade activity, receding effects of trade war and gradual rise in commodity prices. We are maintaining our 2018 exports projection at 6.3% yoy. However, the upside to exports growth will be limited by the high base. Potential headwind for Malaysia’s trade will most possibly come from a trade war.

Source: BIMB Securities Research - 6 Jun 2018