News

• Gross export growth moderated but remained strong at +24.1% yoy in March (Feb: +26.5% yoy), outpacing forecast of +20.0% yoy. Import growth accelerated further to +39.4% yoy (Feb: +27.7% yoy).

• Faster expansion in imports led to lower trade surplus in March 2017 of RM5.4bn (Feb: +RM8.7bn).

• Exports to all major countries grew by double-digit pace. Faster growth was recorded in the US (+16.5% yoy; Feb: +13.2% yoy) and EU (+28.1% yoy; Feb: +26.6% yoy). Meanwhile, there was moderation in export growth to Japan (+12.0% yoy; Feb: +19.9% yoy), China (+40.3% yoy; Feb: +47.6% yoy) and ASEAN (+24.8% yoy; Feb: +34.0% yoy).

Comments

• The strong growth in exports benefited from the ongoing recovery in commodity prices and strong expansion of manufactured exports partly due to low base effect a year ago.

• Exports of commodity-related products advanced at a strong pace to +39.2% yoy (Feb: +39.9% yoy) due mainly to continued recovery in commodity prices. Crude petroleum prices grew by +62.0% yoy (Feb: +65.0% yoy) following low base in 1Q16. Similarly, palm oil products also recorded a strong growth of +35.0% yoy (Feb: +41% yoy). LNG prices recorded a growth of +7.0% yoy (Feb: +3.0% yoy) for the second consecutive month after registering 24 consecutive months of contraction.

• Manufactured exports moderated slightly to +19.9% yoy after registering strong growth of +22.7% yoy in the previous month. This was driven by slower growth in E&E sub-sector which grew by +21.2% yoy (Feb: +22.4% yoy), chemical (+20.6% yoy; Feb: +37.5% yoy) machinery (+8.4% yoy; Feb: +12.9% yoy). The still robust E&E growth was in tandem with global chip sales that advanced further by +18.1% yoy (Feb: 16.5% yoy).

• Capital imports accelerated by +84.8% yoy (Feb: +4.2% yoy) due to lumpy items (i.e. floating structures). Intermediate imports moderated slightly by +35.9% yoy (Feb: +40.3% yoy), in line with slower manufactured export growth. However, despite the moderation, the growth was still robust, suggesting sustainable near-term performance. Consumption imports rebounded by +14.0% yoy (Feb: -0.7% yoy).

• Trade surplus amounted to RM18.9bn in Jan-Mar 2017, lower than RM23.9bn reached in the same period last year. 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 (higher CPO output, new gas and oil fields) as well as firmer commodity prices for the year.

• We maintain our forecast for BNM to leave the OPR unchanged at 3.00% in 2017. Given the resilient export growth and trade surplus, we maintain our ringgit forecast at RM4.30-4.40/US$ for remainder of 2017.

Source: Hong Leong Investment Bank Research - 8 May 2017