• Continued double-digit external trade contractions

• Export growth decreased by 13.7% YoY, a contraction for the seventh straight month

• Imports were down or by 11.1% YoY and sustained double-digit decline for the fourth month

• Trade surplus edged higher to RM24.5bn in September

• Global exports remained subdued

• External trade to be weighed by a higher interest rate environment

OVERVIEW

Summary

Malaysia's exports deteriorated further for the seventh consecutive month but at a slower pace of 13.7% YoY in September (Aug: -18.7%) to RM124.48bn. The pace of decline in imports also slowed to -11.1% YoY (Aug: -21.2%) to RM99.95bn. Total trade fell by 12.6% YoY to RM224.43bn. The trade surplus also shrank by 23.0% YoY to RM24.5bn in September (Aug: +RM17.2bn). Meanwhile, on a month-on-month basis, exports rebounded by 8.2% after falling for two months in a row (Aug: -1.5%) while imports increased by 2.1% (Aug: -1.6%). In 3Q23, exports maintained a double-digit decline for the second straight quarter at 15.2% y/y (2Q23: -11.1%), resulting in a year-to-date (YTD) fall of 8.4% in the first nine months of 2023 (Jan-Sep 2022: +30.1%). Imports continued to record a double-digit decline for the second straight quarter at 16.3% YoY (2Q23: - 11.5%), taking YTD import contraction to 8.9% in the first nine months of 2023 (Jan-Sep 2022: +35.9%). Trade surplus widened to RM59.1bn in 3Q23 (2Q23: +RM53.9bn) but moderated slightly to RM177.3bn in the first nine months of 2023 (Jan-Sep 2022: +RM188.0bn). We continue to see the slowdown to extend towards the end of the year as the high base effect persists. Nevertheless, growth contraction is expected to ease as the high base effect dissipates, whilst China's ongoing recovery could be supportive and further fuel the export recovery. However, we keep our cautious outlook on the external sector, as we expect demand to be weighed by a higher interest rate environment.

Exports maintained double-digit declined. Malaysia's exports posted a reduction of 13.7% YoY in September with the decline in both domestic exports and re-exports. Domestic exports accounted for 77.7% of total exports, declined by 12.4% YoY from RM110.4bn to RM96.7bn. In addition, re-exports valued at RM27.8bn, constituted 22.3% of total exports, decreased by 17.9% YoY from RM33.8bn in the previous year. Meanwhile, on a month-on-month, exports increased by 8.2% or RM9.4bn and on the seasonally adjusted terms, exports weighed up marginally at 1.0% MoM to RM119.9bn.

Overall, the continued, but lesser, double-digit exports decline reflected smaller double-digit contractions in the exports of manufacturing (Sep: -11.8%; Aug: - 17.7%) and agriculture (Sep: -23.1%; Aug: -27.2%) while mining exports registered larger double-digit drop (Sep: -28.0%; Aug 2023: -23.3%).

Exports of manufactured goods which represented 86.5% or RM107.7bn of total exports dipped by 11.8% YoY was weighed down by lower shipments of petroleum products (Sep: -37.9%; Aug: -38.6%), other manufactures (Sep: - 21.9%; Aug: -28.5%), chemical & chemical products (Sep: -12.4%; Aug: -10.0%), palm oil-based manufactured products (Sep: -20.4%; Aug: -24.6%) and rubber products (Sep: -17.8%; Aug: -22.7%).

Agriculture exports (6.5% share) fell by 23.1% to RM8.04bn following the drop in palm oil & palm-oil based agriculture products (Sep: -26.5%; Aug: -31.9%) reflecting smaller decline in export price (Sep: -16.5%; Aug: -43.2%) while export volume growth moderated (Sep: +21.2%; Aug: +108.9%).

Exports of mining goods (6.4% share) eased by 28% YoY to RM7.98bn were pulled down by weaker LNG (Sep: -37.8%; Aug 2023: -26.0%) on decreases in both export price (Sep: -31.1%; -24.2%) and volume (Sep: -9.7%; Aug: -2.4%). Meanwhile, crude oil exports saw a shallower decline (Sep: -13.9%; Aug: -22.5%) as export volume growth (Sep: +7.4%; Aug: +13.3% YoY) mitigated the drop in export price (Sep: -19.9%; Aug: -31.6%).

On a month-on-month basis, exports of manufactured and agriculture goods edged up by 9.6% and 5.8%, respectively while exports of mining goods dropped by 5.5%. For the period of January to September 2023, exports of manufactured goods fell by 6.7% YoY to RM908.23bn, exports of mining goods shrank by 11.6% to RM76.23bn and exports of agriculture goods reduced by 25.5% to RM68.84bn

In terms of destinations, shipments were also lowered across almost all major export destinations in September with Asian countries mostly maintaining a double-digit decline. Exports to the ASEAN region improved although still contracted 10.9% (Aug: -20.9%) following slower exports decline to Singapore (- 12%) and Indonesia (-31.7%), where the continued decline for both markets was due to reduced exports of refined petroleum products. In contrast, exports to Thailand (+4.8%) and Vietnam (+12.1%) recorded positive growth during the month. Exports to China slipped by 17.3% YoY (Aug: -20.3%) while exports to Japan plunged by 25.4% (Aug: -19.4%). Exports to the United States weakened and declined by 9.3% YoY in September (Aug: -9.7%), driven mainly by lower exports of E&E products, machinery, equipment and parts as well as palm oilbased manufactured products, while exports to the EU registered a larger decline of 8.3% (Aug: -4.6%).

Source: BIMB Securities Research - 23 Oct 2023