News

• Gross export growth accelerated to +18.9% yoy (Sep: +14.8% yoy), higher than consensus estimate of 17.3% yoy. Imports also grew at at a stronger pace of 20.9% yoy (Sep: +15.2% yoy).

• The larger rise in monthly exports led to a higher trade surplus of RM10.6bn (Sep: RM8.6bn).

• Exports to all major countries grew at a faster pace except to EU and China. By destination, higher growth was recorded in US (+13.8% yoy; Sep: +10.7% yoy) and Japan (+21.2% yoy; Sep: +8.7% yoy). However, exports to China expanded at a slower pace (+20.5% yoy; Sep: +27.1% yoy). Similarly, exports to the EU decelerated (+9.3% yoy; Sep: +16.1% yoy).

Comments

• The faster growth in exports emanated from a broad-based acceleration across commodity and manufacturing sectors.

• Exports of commodity-related products grew by +21.5% yoy (Sep: +10.5% yoy) due to improvement in both export volume and prices. Palm oil exports rebounded (+7.9% yoy; Sep: -1.7% yoy) due to growth in export volume (+10.0% yoy; Sep: -0.3% yoy) and prices (+1.2% yoy; Sep: -1.3% yoy). Crude oil also accelerated strongly (+62.9% yoy; Sep: -4.8% yoy) as volume increased by +40.2% yoy (Sep: -19.0% yoy) while price remained high (+16.2% yoy; Sep: +17.6% yoy). LNG exports moderated to +8.8% yoy (Sep: +13.4% yoy) as the rise in export volume (+6.0% yoy; Sep: -1.4% yoy) was offset by slower price growth (+2.7% yoy; Sep: +15.0% yoy).

• Manufactured export growth increased to +18.4% yoy (Sep: +16.4% yoy). The acceleration in chemical exports (+17.6% yoy; Sep: +2.9% yoy) and machinery (+11.1% yoy; Sep: +7.1% yoy) offset the slight moderation in E&E products (+17.1% yoy ; Sep: +17.7% yoy). This is the third consecutive month of growth moderation, consistent with moderation in global semiconductor sales. Nevertheless, in terms of level, global chip sales remain strong.

• Capital imports moderated to +5.1% yoy (Sep: +10.4% yoy). Nevertheless, imports of machinery and mechanical appliances continued to advance. Intermediate imports remained supported at 14.8% yoy (Sep: +13.7% yoy) following higher imports of processed industrial supplies particularly plastics. Meanwhile, consumption imports quickened to +11.1% yoy (Sep: +5.6% yoy) due primarily to food and beverage items.

• Trade surplus amounted to RM80.0bn in Jan-Oct 2017, higher than RM69.6bn reached in the same period last year.

• Economic growth has become more entrenched as evidenced by the broad-based expansion in both exports and imports. Hence, we maintain our expectation for BNM to normalise the policy rate by 25bps as early as January 2018. The risk of prolonged period of negative real interest rate amid continued signs of property imbalances also weigh on BNM decision.

Source: Hong Leong Investment Bank Research - 7 Dec 2017