News

• Gross export growth decelerated to +21.5% yoy (Jul: +30.9% yoy), but higher than median estimate of +20.0% yoy. Import growth grew at a faster pace of +22.6% yoy (Jul: +21.8% yoy).

• The continued robust growth in monthly exports led to higher trade surplus of RM9.9bn (Jul: RM8.0bn).

• Exports to all major countries grew at a slower pace except to the US. By destination, lower growth was recorded in China (21.3% yoy; Jul: 28.8% yoy); EU (+21.6% yoy; Jul: +34.0% yoy) and Japan (+19.3% yoy; Jul: +27.4% yoy). However, exports to the US continued to ascent slightly (+14.5% yoy; Jul: +14.3% yoy).

Comments

• The slower but still robust growth in exports emanated from broad-based deceleration across both commodity and manufacturing sectors.

• Exports of commodity-related products moderated to +23.9% yoy (Jul: +40.5% yoy), primarily due to deterioration in commodity volume. Palm oil exports declined (-8.9% yoy; Jul: +13.1% yoy) due to contraction in export volume (-11.6% yoy; Jul: +2.6% yoy) that offset the slight increase in prices (+11.4% yoy; Jul: +9.2% yoy). Crude oil also experienced a similar trend as volume declined by -10.2% yoy (Jul: -9.5% yoy) while price inched up by +11.4% yoy (Jul: +8.2% yoy). LNG product bucked the trend as it showed an acceleration by +110.1% yoy, driven by faster growth in export volume (+55.5% yoy; Jul: +16.9% yoy), amid sustained strong price growth (+35.5% yoy Jul: +39.9% yoy).

• Manufactured export growth also moderated to +21.1% yoy (Jul: +28.6% yoy). This was driven by slower growth in E&E sub-sector which grew by +20.2% yoy (Jul: +28.5% yoy), more moderate expansion in chemical products (+15.7% yoy; Jul: +18.0% yoy) and sharp slowdown in in machinery (+7.1% yoy; Jul: +25.1% yoy). The slower yet robust expansion in E&E products is consistent with steady growth in global chip sales (+23.9% yoy; Jul: +24.0% yoy).

• Capital imports returned to growth in August (+12.7% yoy; Jul: -16.5% yoy) due to higher importation of machinery and mechanical appliances. Intermediate imports increased slightly to +25.5% yoy (Jul: +24.2% yoy), underpinned by higher imports of parts and accessories of capital goods. Consumption imports eased to +17.8% yoy (Jul: +21.8% yoy).

• Trade surplus amounted to RM60.9bn in Jan-Aug 2017, higher than RM52.2bn reached in the same period last year.

• The gradual growth moderation in trade data was expected as the effect of Raya timing eased. Nevertheless, the continued double-digit growth in exports was also boosted by low commodity prices in 2016 and restocking of semiconductor ahead of several launches of smartphones. We retain our GDP growth projection of 5.4% for 2017 and unchanged OPR for the remainder of 2017.

Source: Hong Leong Investment Bank Research - 9 Oct 2017