News

• Gross export growth moderated sharply to +4.7% yoy (Nov: +14.4% yoy, lower than consensus estimate of 12.7% yoy. Imports also grew at a more moderate pace of +7.9% yoy (Nov: +15.2% yoy).

• The larger rise in monthly imports led to a lower trade surplus of RM7.3bn (Nov: RM9.9bn). Jan- Dec 2017 trade surplus was higher at RM97.2bn (2016: RM88.1bn).

• Exports to most major countries grew at a slower pace except to China. By destination, contraction was recorded in US (-3.1% yoy; Nov: +13.3% yoy), deceleration in Japan (+7.1% yoy; Nov: +7.9% yoy) and EU (+11.5% yoy; Nov: 12.4% yoy). However, exports to China accelerated (+12.8% yoy; Nov: +3.4% yoy).

Comments

• The slower growth in exports emanated from a broad based deceleration across commodity and manufacturing sectors, affected by ringgit appreciation. Malaysia’s exports in ringgit terms showed a sharp deceleration to +4.7% yoy (Nov: +14.4% yoy). In USD terms, Malaysia’s exports decelerated, but at a more moderate pace of +15.3% yoy; (Nov: +19.4% yoy). The difference between the export figures is accounted by the strengthening of ringgit (9.2% appreciation of RM4.05/USD in December 2017 from RM4.46/USD in December 2016).

• Exports of commodity-related products moderated to +3.5% yoy (Nov: +4.2% yoy) due to slower growth in export volume and price. LNG exports moderated (+8.4% yoy; Nov: +10.9% yoy) due to moderation in both volume (+4.4% yoy; Nov: +6.6% yoy) and price (+3.8% yoy; Nov: +4.1% yoy). Meanwhile, palm oil exports declined (-8.6% yoy; Nov: -5.1% yoy) as average unit export price contracted (-6.1% yoy; Nov: +1.1% yoy) while export volume remained moderate at +6.1% yoy (Nov: +1.6% yoy).

• Manufactured export growth decelerated sharply to +5.6% yoy (Nov: +17.9% yoy) after five consecutive months of double digit growth. Similarly, E&E products also slowed sharply to +6.3% yoy (Nov: +21.1% yoy). Of significance, this is the first single digit increase after recording double digit expansion for the past eleven consecutive months. Chemical product exports also decelerated (+6.8% yoy; Nov: +20.1% yoy). In addition, machinery products moderated as well (+4.8% yoy ; Nov: +7.8% yoy).

• Imports were mainly supported by capital imports growth (+35.9% yoy; Nov: 12.2% yoy) due to higher imports of machinery, equipment and parts. On the other hand, intermediate imports decreased by -0.7% yoy (+13.9% yoy), as well as consumption imports (-2.6% yoy; Nov: +8.9% yoy).

• For this year, we expect Malaysia’s economy to grow at a more moderate pace of +5.3% yoy (2017f: 5.8% yoy) as the base effect wanes off. We maintain our expectation for BNM to maintain the policy rate at 3.25% in 2018 barring any upside surprise to growth and inflation.

Source: Hong Leong Investment Bank Research - 8 Feb 2018