News

• Gross exports expanded strongly by +26.5% yoy; higher than January figure of +13.6% yoy, outpacing estimate of +15.1%. Imports rose by +27.7% yoy (Jan: +16.1% yoy). The solid expansion in trade was mainly a result of low base effect due to timing of CNY festivity last year.

• Faster expansion in exports led to higher current account surplus in February 2017 (+RM8.7bn; Jan: +RM4.7bn).

• Exports to most major countries expanded at a faster pace. Double-digit expansion was recorded in China, ASEAN, EU and US (Feb: +47.6% yoy; +34.0% yoy; +26.6% yoy; +13.2% yoy respectively; Jan: +31.6% yoy; +13.9% yoy; +12.0% yoy; +5.6% yoy respectively). Meanwhile, exports to Japan expanded at a slower pace of +19.9% yoy (Jan: +23.2% yoy).

Comments

• The strong growth in exports benefited from the ongoing recovery in commodity prices and strong expansion of manufactured exports amid low base effect a year ago (CNY festivity).

• Exports of commodity-related products advanced further to +39.9% yoy (Jan: +34.9% yoy) due to continued recovery in commodity prices. Crude petroleum prices grew by +65.0% yoy (Jan: +43.0% yoy) following low base as prices touched the lowest point in Feb 2016. Similarly, palm oil products also recorded growth of +41% yoy (Jan: +45% yoy). LNG prices turned around to grow by +3% yoy after registering 24 consecutive months of contraction.

• Manufactured exports registered a strong growth of +22.7% yoy (Jan: +7.7% yoy) due partly to low base effect following the CNY season in February 2016. E&E accelerated by +22.4% yoy (Jan: +11.4% yoy), chemical increased by +37.5% yoy (Jan: +15.2% yoy) while machinery rebounded by +12.9% yoy (Jan: -8.3% yoy). The robust E&E growth was in tandem with global chip sales that advanced by +16.5% yoy. Despite the lower monthly sales in February, the magnitude of m-o-m decline was smaller than normal seasonal patterns, suggesting continued growth of the E&E sector in the immediate-term.

• Intermediate imports maintained its strong growth (+39.9% yoy; Jan: +40.3% yoy) suggesting sustainable near-term performance. Capital import growth, however, moderated to +5.6% yoy (Jan: 35.2% yoy). Consumption imports declined by -0.6% yoy on the back of lower imports of food (Jan: -1.7% yoy).

• Trade surplus amounted to RM13.4bn in Jan-Feb 2017, slightly ahead of RM12.7bn recorded in the same period last year. As such, we maintain our 2017 current account (CA) forecast at RM25bn (2016: RM25bn). Our stable CA forecast takes into account higher commodity surplus stemming from increased export volume (CPO rebound, new gas and oil fields) as well as firmer commodity prices.

• We maintain our forecast for BNM to leave the OPR unchanged at 3.00% in 2017. Given the strength in exports and trade surplus, we maintain our ringgit forecast at RM4.30-4.55/US$ in 2017.

Source: Hong Leong Investment Bank Research - 6 Apr 2017