News

Malaysia’s gross exports contracted by 3.3% yoy in April, the third consecutive month of decline. The figure was again lower than consensus estimate of +0.4% yoy. However, gross import growth surged further to 9.2% yoy (Mar: +7.4% yoy) driven mainly by consumption imports (+12.3% yoy) and intermediate imports (+7.2% yoy).

Trade surplus shrank significantly to RM0.9bn (Mar: RM4.9bn), the lowest level since end-1997.

Singapore, China and Japan remained as the three main export markets. Exports to China reverted back to contraction mode (-13.4% yoy) after a mild turnaround in March. Exports to Japan declined further (-5.9% yoy; Mar: -3.2% yoy) mainly on lower shipment of LNG. Exports to EU continued to decline by 2.9% yoy (Mar: -5.5% yoy) driven by lower exports of CPO and rubber.

Comments

The traditional export boost from petrochemical segment disappeared in April. During the month, export performance was generally subdued across all product segments. Nevertheless, the drag from CPO exports also lessened in April (-4.7% yoy; Mar: -18.6% yoy).

Malaysia’s export performance was still broadly in line with those of regional countries which showed mixed performance during the month (Figure #2).

Regional countries that had announced May export performance (i.e. China, Korea & Taiwan) only showed some marginal improvement. This augurs well with our expectation that global demand will remain subdued throughout 2013.

Commodity price continued to remain weak in May. CPO export price still declined by a hefty 28.6% yoy in May (Apr: -34.3% yoy). Given the high CPO price base in 2Q 2012 (>RM3,000/tonne), we continue to expect lackluster CPO exports with gradual recovery in the coming months.

On the positive note, CPO volume shipment appears to have bottomed up. Based on the export price, CPO export volume could have risen by ~20% in April.

Among the product segments that perform favourably include machinery (+8.7% yoy; Mar: -2.0% yoy) and chemical products (+3.7% yoy; Mar: -3.7% yoy).

On imports, imports of intermediate goods rebounded further by 7.2% yoy (Mar: +2.4% yoy). This suggests that manufactured exports could potentially stage a rebound in the coming months.

Capital imports expanded at a slower pace of 1.4% yoy in April (Mar: +25.8% yoy), still pointing to an expansion in capital investment which represents an important engine of growth for 2013.

The strong rebound in consumption imports (+12.3% yoy) after two consecutive months of decline alleviate the fear that private consumption was contracting at too fast a pace.

For 2013, we reiterate our view that Malaysia will grow at more moderate pace of 4.5% given lacklustre global demand amid softer commodity outlook.

We reiterate our view of steady OPR at 3.0% in 2013.

Source: Hong Leong Investment Bank Research - 10 Jun 2013