News

Malaysia’s gross export growth surged to 18.9% yoy in April (Mar: +8.3% yoy), significantly higher than consensus estimate of 9.7% yoy. Gross import growth also improved to 5.0% yoy (Mar: +0.5% yoy), driven mainly by strong imports of consumption goods (+8.9% yoy).

Trade surplus moderated somewhat but remained high at RM8.9bn (Mar: RM9.5bn). Average monthly trade surplus for 2013 was RM5.9bn.

Exports to main destinations experienced strong growth. Exports to China and Japan rebounded sharply by 11.5% yoy and 13.1% yoy respectively (Mar: -1.8% yoy & -0.9% yoy respectively). During the month, expansion in gross exports was driven largely by strong shipments to the advanced economies, i.e. Euro area (+20.7% yoy) & the US (+17.1% yoy).

Comments

The strong April export performance was characterized by robust O&G shipment reinforced by buoyant E&E exports.

Trade surplus is now supported mainly by resilient commodity exports, which have low import content. Exports of refined petroleum (+37.3% yoy), crude petroleum (+37.1% yoy) and LNG (+31.8% yoy) contributed positively to April’s trade balance.

E&E exports sustained its strong expansion, growing by 22.0% yoy (Mar: +6.2% yoy). We can still expect E&E exports to remain in expansion mode in the near-term with global semiconductor sales remaining strong in April (+11.5% yoy; Mar: +11.4% yoy).

Exports of palm oil disappointed (-4.8% yoy; Mar: +4.0% yoy) as better CPO export price in April (RM2,700/tonne or +20.9% yoy) did not give a helping hand. Based on the export price, CPO volume shipment appears to have suffered a sharp decline of ~25% yoy in April. The moderation in CPO prices in May (RM2,457/tonne) could further dampen palm oil export performance.

Capital imports rebounded moderately by 4.3% yoy in April (Mar: -3.4% yoy), ending two consecutive months of decline.

After a resilient export growth in Jan-Apr (+12.8% yoy), indicators are now pointing to softer export performance in the near term. Intermediate imports declined for the second consecutive month by 3.9% yoy in April (Mar: -8.8% yoy). Regional exports also began to soften while China’s manufacturing PMI remained subdued at 50.8 in April.

We maintain our full-year 2014 GDP growth forecast at 5.5%. Sequentially, we still expect quarterly yoy GDP growth to taper off due to higher base and fading of export boost.

Reinforced by the hawkish MPS, we expect BNM to hike the OPR by 25bps in its July MPC meeting. We expect BNM to stay pat thereafter to assess the evolution of growth,

Source: Hong Leong Investment Bank Research - 9 Jun 2014