News

• Gross exports expanded by +13.6% yoy in January, higher than December growth of +10.7% yoy but lower than estimate of +15.0% yoy. Imports rose by +16.1% yoy (Dec: +11.5% yoy), higher than forecast of +10.2% yoy.

• The faster pace of import growth led to narrower trade surplus in January 2017 (+RM4.7bn; Dec 16: +RM8.7bn; Jan 16: +5.4bn).

• Exports to all major countries expanded at a faster pace on an annual basis. Double-digit expansion was recorded in exports to China, Japan, EU and ASEAN (Jan: +31.6% yoy; +28.3% yoy; +12.0% yoy; +13.9% yoy respectively; Dec: +22.3% yoy; -7.4% yoy; +3.8% yoy; +7.9% yoy respectively). Meanwhile, exports to US picked up but remained modest at +5.6% yoy (Dec: +1.7% yoy).

Comments

• Export growth in January benefited from the ongoing recovery in commodity exports and continued expansion of manufactured exports.

• Exports of commodity-related products charted a stronger growth +35.0% yoy (Dec: +22.7% yoy) due to continued recovery in commodity prices and export volume. Crude petroleum prices grew by +43% yoy (Dec: +14.0% yoy), the second increase after more than two years of decline. Similarly, refined petroleum product prices recorded higher growth of +23% yoy (Dec: +1.0% yoy). In addition, pace of LNG price contraction narrowed to -5% yoy (Dec: -12.0% yoy). Export volume of crude petroleum, petroleum products and LNG continued to expand. However, that of palm oil products declined at a faster pace due to seasonal factors (-16.0% yoy; Dec: -11.0% yoy).

• Manufactured exports registered a slightly faster annual pace of growth (+7.7% yoy; Dec: +7.2% yoy) as the faster growth in E&E (+11.4% yoy; Dec: +9.0% yoy) and rebound in metal exports (+10.8% yoy; Dec: -10.6% yoy) offset the decline in machinery (-7.6% yoy; Dec: -11.6% yoy) and slower pace of growth in chemical products (+15.2% yoy; Dec: +19.7% yoy).

• Intermediate imports grew further by +10.4% yoy (Dec: +9.6% yoy), suggesting continued expansion in manufactured export growth in the near-term. Meanwhile, capital imports grew strongly by +35.2% yoy (Dec: 11.6% yoy) due to higher vessels imports.

• We are not overly concerned on the narrower trade surplus (RM4.7bn; Dec: +RM8.7bn) as it is due to lumpy items (vessels) which are not recurring in nature. We maintain our 2017 current account (CA) forecast at RM25.0bn, taking into account higher commodity surplus amid resilient manufactured exports.

• We expect BNM to leave the OPR at 3.00% in 2017 on expectations of stronger growth and firmer inflation.

• Despite higher chance of a Fed rate hike in March, we retain our 2017 ringgit forecast at RM4.30-4.55/US$ as US President Trump has recently turned more neutral on trade policy during his first speech to Congress.

Source: Hong Leong Investment Bank Research - 6 Mar 2017