News

• Gross export growth accelerated to +30.9% yoy in Jul (Jun: +10.0% yoy), higher than median estimate of +23.0% yoy. Import growth also picked up to +21.8% yoy (Jun: +3.7% yoy).

• Despite the strong export growth, higher base of imports led to lower trade surplus of RM8.0bn (Jun: RM9.9bn).

• Exports to all major countries grew at a faster pace. By destination, higher growth was recorded in the US (+14.4% yoy; Jun: 1.8% yoy), China (+28.8% yoy; Jun: +27.3% yoy) and EU (+34%n yoy; Jun: +10% yoy).

Comments

• The faster growth in exports emanated from broad-based acceleration across both commodity and manufacturing sectors, partly aided by low base effect (timing difference in Raya festivities).

• Exports of commodity-related products strengthened to +40.5% yoy (Jun: +16.7% yoy), primarily due to refined petroleum product which saw an increase in export price (+32.4% yoy; Jun: +22.2% yoy) and turnaround in volume (+40.0% yoy; Jun: -31.0% yoy). Other commodity prices such as crude petroleum and LNG rose at slower pace (+8.2% yoy; +39.9% yoy respectively; Jun: +9.0% yoy; +55.4% yoy respectively). Meanwhile, export volume of crude petroleum continued to decline (-9.5% yoy; Jun: - 9.2% yoy) while demand for LNG and palm oil product moderated (+16.9% yoy; +2.4% yoy respectively; Jun: +27.0% yoy; +8.6% yoy respectively).

• Manufactured export growth gained pace to +28.6% yoy (Jun: +8.1% yoy). This was driven by faster growth in E&E sub-sector which grew by +28.5% yoy (Jun: +15.1% yoy), faster expansion in chemical products (+18.0% yoy; Jun: +4.5% yoy) and higher growth in machinery (+25.1% yoy; Jun: +0.1% yoy). The faster expansion in E&E products is consistent with the continued rise in global chip sales (+24.0% yoy; Jun: +23.7% yoy) which was supported by across the board improvement in product and market.

• Capital imports declined by -16.5% yoy (Jun: +0.6% yoy, due to lower shipments of ships, boats and floating structures. Intermediate imports accelerated to +24.2% yoy (Jun: +10.3% yoy), driven by processed industrial supplies. Likewise, consumption imports rebounded to +21.8% yoy (Jun: -5.2% yoy). Other imports which include import for re exports also accelerated sharply (+56.3% yoy; Jun: -8.6% yoy).

• Trade surplus amounted to RM51.0bn in Jan-Jun 2017, higher than RM43.7bn reached in the same period last year.

• The faster expansion in trade data was partly due to low base effect in July 2016 (timing difference in Raya festivities). We expect exports to moderate in the remaining months of 2017 as the low base effect wears out. Hence, we retain our macro projections for 2017 (GDP growth: +5.4%; OPR: 3.00%).

Source: Hong Leong Investment Bank Research - 7 Sept 2017