News

• Gross export growth moderated to +14.4% yoy (Oct: +18.9% yoy), in line with consensus estimate of 14.5% yoy. Imports also grew at a more moderate pace of +15.2% yoy (Oct: 20.9% yoy).

• The larger rise in monthly imports led to a lower trade surplus of RM9.9bn (Oct: RM10.6bn).

• Exports to all major countries grew at a slower pace except to the EU. By destination, slower growth was recorded in US (+13.3% yoy; Oct: +13.8% yoy), Japan (+7.9% yoy; Oct: +21.2% yoy) and China (+3.4% yoy; Oct: +20.5% yoy). However, exports to the EU accelerated (+12.4% yoy; Oct: +9.3% yoy).

Comments

• The slower growth in exports emanated from a broad based deceleration across commodity and manufacturing sectors.

• Exports of commodity-related products moderated sharply to +4.2% yoy (Oct: +21.4% yoy) due to slower growth in export volume. Crude oil declined (-3.1% yoy; Oct: +62.9% yoy) as volume contracted by -23.8% yoy (Oct: +40.2% yoy) while price remained high (+27.2% yoy; +16.2% yoy). Refined petroleum moderated sharply to +1.8% yoy (Oct: +22.8% yoy) as export volume contracted -16.5% yoy (Oct: -2.8% yoy) while prices grew stronger (+20.9% yoy; Oct: +18.2% yoy). Meanwhile LNG exports quickened to +10.9% yoy (Oct: +8.8% yoy) following acceleration in export volume (+6.6% yoy; Oct: +6.0% yoy) and price increase (+4.1% yoy; Oct: +2.7% yoy).

• Manufactured export growth increased, albeit at a slower pace of +17.9% yoy (Oct: +18.4% yoy). After three months of moderation, E&E products re-accelerated (+21.1% yoy; Oct: +16.9% yoy) along with chemical product exports (+20.1% yoy; Oct: +17.6% yoy). However, this was offset by the moderation in machinery products (+7.8% yoy; Oct: +11.1% yoy), optical exports (+15.2% yoy; Oct: +20.2% yoy) and metal products (+20.8% yoy; Oct: 37.8% yoy).

• Capital imports accelerated to +12.2% yoy (Oct: +2.8% yoy) due to higher imports of machinery and mechanical appliances. Intermediate imports remained supported at +13.8% yoy (Oct: +15.4% yoy) following higher imports of processed industrial supplies. Meanwhile, consumption imports slowed to +6.6% yoy (Oct: +11.1% yoy).

• Trade surplus amounted to RM90.0bn in Jan-Nov 2017, higher than RM78.7bn reached in the same period last year.

• Global leading indicators continue to point to continued recovery in the world economy. Going into 2018, as Malaysia’s economic growth becomes more entrenched, 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 - 8 Jan 2018