News

Malaysia’s gross exports remained robust in May, expanding by 16.3% yoy (Apr: +18.7% yoy). The figure was above the consensus estimate of 15.2% yoy. Gross import growth accelerated to 11.9% yoy (Apr: +5.0% yoy), driven mainly by a strong rebound in imports of intermediate goods (+10.4% yoy; Apr: -3.9% yoy).

Trade surplus narrowed to RM5.7bn (Apr: RM8.7bn), the lowest level in ten months. Average monthly trade surplus for 2013 was RM5.9bn.

By destination, exports to the advanced economies continued to experience strong growth. Exports to the US & Euro area grew by 13.8% yoy and 23.4% yoy (Apr: +17.1% yoy & +20.7% yoy respectively) mainly on higher shipment of E&E products. Exports to Japan sustained its doubledigit growth at 11.4% yoy (Apr: 13.1% yoy). Meanwhile, exports to China declined marginally by 0.4% yoy (Apr: +11.5% yoy).

Comments

The strong May export performance continued to be characterized by robust O&G shipment reinforced by buoyant E&E exports.

E&E exports continued to grow by a double-digit rate, albeit at a slower pace of 12.4% yoy (Apr: +22.0% yoy). We can still expect E&E exports to remain in expansion mode in the near-term but growth will taper given higher base in 2H 2013 (+9.2% yoy; 1H13: -4.3% yoy).

O&G exports remained upbeat, driven mainly by shipment of crude petroleum (+73.4% yoy), petroleum products (+50.0% yoy) and LNG (+17.3% yoy).

Exports of palm oil rebounded to grow by 19.9% yoy (Apr: -4.8% yoy) given the 5.6% yoy rise in CPO export price in May (RM2,457/tonne; May-13: RM2,326/tonne) and higher volume shipment.

While trade surplus is now supported by robust O&G exports, a revival in import growth has eaten into the high level of surplus. Going forward, trade surplus may be further eroded by (i) lower-than-expected CPO export price (a decline of RM100/tonne in CPO export price will shave RM2.6bn from annual trade surplus), and (ii) potential surge in capital imports as Rapid project gathers pace.

Capital imports picked up further to grow by 8.5% yoy in May (Apr: +4.3% yoy), a sign that investment spending continues to maintain its momentum in 2Q14.

Near-term outlook for exports has improved given the strong rebound in intermediate imports (+10.4% yoy; Apr: -3.9% yoy). Global manufacturing PMI has also improved in June with the exception of Euro zone.

We maintain our 2014 GDP forecast at 5.5%, with quarterly GDP growth tapering off due to higher base and fading of export boost.

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, inflation and financial data related to the property sector.

Source: Hong Leong Investment Bank Research - 7 Jul 2014