• Total trade fell sharper due to high base effect

• Exports fell further in August, contracted 18.6% YoY due to lower exports of E&E and petroleum products

• Imports down 21.2% and sustained double-digit decline for the third month

• Trade surplus narrowed slightly to RM17.3bn

• We revise down our projections for both exports and imports

• External trade still faces headwinds

OVERVIEW

Summary

Malaysia's trade in August 2023 contracted by 19.8% YoY or RM52.7bn to RM213.0bn as compared to RM265.8bn in August 2022 amid slower global demand and lower commodity prices. Consistent with the reduction in total trade, exports was lower by 18.6% YoY to RM115.2bn while imports edged down by 21.2% YoY to RM97.9bn. Meanwhile, trade surplus continued to expand, rising by 0.1% YoY to RM17.3bn in August, a 40th consecutive month of trade surplus. Meanwhile, on a month-on-month basis, exports contracted 1.4% or RM1.7bn, imports also decreased 1.6% or RM1.6bn as compared to RM99.5bn in July 2023, total trade declined by 1.5% or RM3.3bn and trade surplus declined by 0.3%. Exports, imports, total trade and trade surplus posted a negative growth for the period of January to August 2023 as compared to the same period of the preceding year. Total trade decreased by 8.1% to RM1.72tn, in line with the decline in exports which shrank by 7.6% to RM935.22bn as well as imports which slipped by 8.6% to RM782.29bn. At the same time, the trade surplus declined 2.0% to RM152.92bn as compared to the same period in 2022. We continue to see downside risks to the external trade sector as the year progresses. The weak exports were closely linked to weaker external demand while for imports, although the decline may be linked to lower price effect, we believe it could also signal cautious approach by local producers and suppliers in response to concerns over stability of demand outlook.

Exports maintained double-digit declined in August. Exports in August decreased by RM26.4bn from RM141.5bn, reflecting a decrease in both reexports and domestic exports. Re-exports amounted to RM23.2bn, shrank by 33.5% YoY (Jul: -13.2%). Domestic exports worth RM92.0bn, contributing 79.9% to total exports, contracted by 13.8% YoY (Jul: -13.0%). Meanwhile, on a monthly basis, exports contracted 1.4% or RM1.7bn, whilst on the seasonally adjusted terms, exports weighed up marginally at 0.6% to RM119.0bn

Exports of manufactured goods remained significant to total exports in August 2023 with a share of 85.4%, recorded a negative growth of 17.7% YoY or RM21.1bn to RM98.4bn. The decrease was impacted by E&E products (Aug: - 15.3%; Jul: +7.3%, Jun: +3.3%), petroleum products (Aug: -38.6%; Jul: -48.7%), other manufactures (Aug: -28.5%; Jul: -17.7%), palm oil-based manufactured products (Aug: -24.6%; Jul: -35.2%; Jun: -36.3%) and chemical & chemical products (Aug: -10.0%; Jul: -9.1%; Jun: -19.0%).

Mining products represented 7.3% of total exports with the amount of RM8.5bn, contracted by 23.1% YoY from RM11.0bn in August 2022. This decline was in accordance with lower exports of liquefied natural gas (Aug: -26.0%; Jul -39.7%; Jun: -40.8%), crude petroleum (Aug: -22.5%; Jul: -20.6%; Jun: -43.7%) and metalliferous ores and metal scrap (Aug: -16.0%; Jul: -13.6%). The declined in LNG exports was in line with the decrease in export volume (-2.4%) and average unit value (-24.2%) while the declined in the shipments of crude petroleum was due to the decrease in average unit value (-31.6%), parallel with the 9.8% drop in Brent oil prices to RM397.0 per barrel. In contrast, export volume went up by 13.3%.

Exports of agriculture products which contributed 6.6% to total exports also posted a decrease of 27.1% YoY to RM7.6bn. The main contributor to the decline was palm oil & palm oil-based agriculture products, decelerated by 31.9% YoY (Jul: -34.4%, Jun: -49.3%) from RM8.2bn to RM5.6bn. Exports of palm oil, the main commodity in this product group, was subdued by RM2.3bn (-33.0%) in line with the average unit value (-43.2%), along with the 8.7% drop in world price for the crude palm oil to RM3,805.0 per tonnes. However, export volume posted an increase of 108.9%. Natural rubber held 0.3% of total exports, decreased by RM94.9mn or 20.5% (Jul: -19.8%) to RM367.2mn On a month-on-month basis, exports of mining and agriculture goods rose by 15.3% and 0.7%, respectively while exports of manufactured goods edged down by 3.0%.

For the period of January to August 2023, exports of manufactured goods contracted by 5.9% YoY to RM800.6bn following decreased exports of palm oilbased manufactured products, manufactures of metal and rubber products. However, strong exports of paper and pulp products, processed food as well as E&E products cushioned the impact of the decline. Exports of mining goods slipped by 9.1% to RM68.3bn on lower shipments of crude petroleum, LNG as well as petroleum condensates and other petroleum oil. Exports of agriculture goods fell by 25.8% to RM60.8bn, due to slower exports of palm oil and palm oil-based agriculture products following decrease in export prices of palm oil.

In terms of destinations, Singapore and China were the main destination countries with a total contribution of 27.4% to Malaysia's total exports in August 2023. Exports to Singapore which constituted 14.6% to total exports was valued at RM16.8bn, flatten by RM4.0bn or 19.3% YoY (Jul: -19.7%). Exports to ASEAN countries constituted 29.1% of Malaysia's total exports in August, diminished by 20.6% YoY. On the other hand, China was the second highest country of destination in August 2023 with a value of RM14.7bn and contributed 12.8% to Malaysia's total exports, edged down by 20.3% (Jul: +6.1%; Jun: -8.5%) or RM3.7bn. There was continued decline in exports to the European Union (EU) as exports to the EU dropped for seven months in a row by 4.6% YoY (Jul: -5.8%; Jun: -23.7%). Shipments to Japan slid at a double-digit pace for the second month (Aug: -19.3%; Jul: -26.9%, Jun: -21.1%), and exports to the US also declined by 9.7% (Jul: -2.2%; Jun: -19.0%) following strong demand for E&E products.

Imports sustained double-digit decline for the third month. Imports continued to experience a decline in August, with 21.2% YoY (Jul: -16.1%) or RM26.4bn from RM124.2bn in the same month of preceding year to RM97.9bn. It also marked the sixth straight month of negative growth, largely due to a continued decline in imports of intermediate goods and consumption goods.

Imports of intermediate goods stood at RM51.5bn or 52.6% of total imports fell by 22.6% YoY (Jul: -20.9%; Jun: -25.3%). Imports of consumption goods (8.7% of total imports), decreased 5.4% (Jul: +5.9%; Jun: -11.9%) to RM8.5bn. On the other hand, imports of capital goods, contributed 10.9% to total imports, increased by 5.4% (Jul: +3.6%; Jun: -12.6%) to RM10.7bn.

Manufactured products continued to decline with 19.5% YoY (Jul: -14.5%) from RM102.9bn to RM82.8bn and thus constituted 84.6% of total imports. The decrease was affected by lower imports of petroleum products (Aug: -49.2%; Jul: -34.4%), E&E products (Aug: -14.6%; Jul: -15.9%) and chemicals & chemicals products (Aug: -20.0%; Jul: -12.8%). Imports of mining products which contributed 8.2% of total imports posted a decline of 37.7% (Jul: -21.3%) to RM8.1bn, following lower imports of crude petroleum (Aug: -33.1%; Jul: +0.3%) and liquefied natural gas (Aug: -74.4%; Jul: -38.7%). Imports of agriculture products contracted by 14.4% (Jul: -13.6%) to RM5.4bn in line with lower imports of other vegetables oil (Aug: -50.8%; Jul: -62.4%), palm oil & palm oilbased agricultural products (Aug: -23.9%; Jul: -41.2%) and natural rubber (Aug: -41.1%; Jul: -24.9%). The relatively lower commodity prices could dampen imports growth, and this would add into the reduced cost pressures as shown in downward trend in PPI which deflated for the 6 consecutive month in July, declining by -2.3% YoY (Jun: -4.8%).

Imports on a monthly basis also decreased, with 1.6% MoM as compared to RM99.5bn in July 2023. On seasonal adjustment terms, imports fell 1.7% MoM to RM95.7bn.

During the period of January to August 2023, imports edged down by 8.6% YoY to RM782.3bn. Imports of intermediate goods contracted by 15.6% and consumption goods declined 1.3%. On the other hand, imports of capital goods increased 1.2%.

Source: BIMB Securities Research - 20 Sept 2023