• Total Trade Rebounded to 13.3% YoY
   
• Exports Growth Picked Up to 8.7% YoY
   
• Imports surged by 18.8% YoY

• Trade surplus narrowed to RM10.1bn in January

• Exports to improve this year buoyed by a bottoming of the global electronics export downcycle

Summary

Malaysia's trade performance in January 2024 grew strongly, rose by a doubledigit along with encouraging trading activities. Total trade bounced back to record an increase of 13.3% or RM27.5bn to RM234.7bn as compared to RM207.2bn in the previous year, after experiencing a decline for ten consecutive months. Imports jumped 18.8% YoY or RM17.8bn to RM112.3bn and exports was valued at RM122.4bn also strengthened by 8.7% YoY. Trade balance continued to record a surplus amounting RM10.1bn, down by 44.2% from RM18.1bn in January 2023. As compared to December 2023, the performance of exports, imports and total trade recorded an increase of 3.4%, 5.3% and 4.3%, respectively. While, trade balance recorded a contraction of 13.8%.

Exports growth turned positive. Exports rebounded and registered the first annual growth after 10 months of contraction, growing 8.7% YoY in January 2024, in line with the rise in domestic exports and re-exports. Domestic exports worth RM94.7bn, contributing 77.4% to total exports rose by 10.1% YoY and reexports amounted to RM27.7bn, grew by 4.1% YoY. Meanwhile, a monthly comparison showed that exports grew by 3.4% MoM or RM4.0bn and on the seasonally adjusted terms, exports grew by 16.0% MoM to RM129.5bn.

The export rebound in January was largely due to higher shipments of manufactured goods (Jan: +9.3%; Dec: -10.3%; Nov: -6.7%) and agriculture goods (Jan: +17.5%; Dec: -25.9%; Nov: -6.0%). This fully offset a decline in exports of mining goods (Jan: -4.9%; Dec: +9.1%; Nov: -2.3%).

Exports of manufactured goods remained significant to the total exports in January 2024 with a contribution of 84.7%, recorded an expansion of 9.3% YoY or RM8.8bn to RM103.6bn. The increase was impacted by higher exports of petroleum products (+24.2%), machinery, equipment & parts (+35.7%), iron & steel products (+70.4%), manufactured metal goods (+31.3%) and optical & scientific equipment (+21.8%). However, E&E exports fell further for the 6th straight month albeit at slower pace of -6.5% YoY. Exports of agriculture products which contributed 6.7% of total exports also posted an increment of 17.5% YoY to RM8.2bn. The main contributor to the increase was palm oil & palm oil-based agricultural products, rose by 16.3% from RM5.3bn to RM6.2bn. Mining goods exports comprised 7.9% of total exports, on the other hand, contracted by -4.9% YoY to RM9.7bn from RM10.2bn as lower exports of LNG (- 9.3%) and metalliferous ores & metal scrap (-22.5%) more than offset the increase in crude petroleum exports (+17.7%).

In terms of destinations, exports to China (Jan: -7.4%; Dec: -1.5%, Nov: -8.4%) marked the largest decline, followed by Thailand (Jan: -12.6%; Dec: -11.9%; Nov: -0.5%). However, exports to ASEAN countries turned positive (Jan: +9.5%; Dec: -12.7%, Nov: -5.0%). Similarly, export to the US also rebounded (Jan: +11.9%; Dec: -5.1%, Nov: -8.7%)

Imports surged further. Import in January 2024 grew strongly by 18.8% YoY or RM17.8bn, to post a value of RM112.3bn. As compared to December 2023, imports increased by 5.3% MoM or RM5.7bn while on seasonally adjusted terms, imports also increased by 9.4% MoM to RM115.0bn. The growth was underpinned by higher purchases of all major types of import products; intermediate goods (Jan: +21.4%; Dec: +10.1%; Nov: -5.6%), capital goods (Jan: +41.8%; Dec: +24.6%; Nov: 51.3%) and consumer goods (Jan: +25.4%; Dec: - 0.7%; Nov: +2.4%). By sector, imports of manufactured products increased by 19.0% and was driven by higher imports of E&E products (+15.5%); petroleum products (+27.8%) and machinery, equipment & parts (+24.1%). Higher imports of agriculture goods (+19.1%) and mining goods (+10.0%) also contributed to the import growth in January, mainly due to higher inbound shipment of natural rubber (+33.9%) and sawn timber & moulding (++59.7%) and crude petroleum (+20.9%) and LNG (+85.0%)

Lower trade surplus. Trade surplus shrank further to RM10.1bn in January, the smallest monthly surplus in the post-pandemic period.

OUTLOOK

Export growth picked up to 8.7% YoY while import growth was solid at 18.8% YoY in January. The strong start to January trade data bodes well for our view

that export growth will improve in 2024, notwithstanding monthly fluctuations. Recovery in Malaysia’s exports will be backed by turnaround in E&E trade and we expect support to export growth from the bottoming out of the global electronics export downcycle in 2H24. Furthermore, increased demand for petroleum products and palm oil could also support exports growth this year. Importantly, the strong import growth in imports of intermediate goods and capital goods pointed to stabilization in the manufacturing sector activities. Imports will continue to be driven by resilient domestic demand conditions for investment and consumption spending. Growth in the global economy, coupled with changes in demand for Malaysia’s goods from abroad will continue to support external trade recovery. The recovery will also be largely driven by base although the sequential recovery could be challenging in 1H24 given demand from the advanced economies like the US and EU area may be constrained by the high borrowing costs. We maintain our 2024 forecast exports and imports to rebound and grow at 4.1% and 3.9% respectively. Several downside risks could disrupt trade outlook, such as geopolitical developments in the red sea region which may also inflict some temporary supply chain disruptions/delays and uncertainties in commodity prices.

Source: BIMB Securities Research - 21 Feb 2024