Malaysia’s February exports declined by -2.0% yoy (Jan: +17.9% yoy), missing expectations of +8.0% yoy. Imports also declined (-2.8% yoy; Jan: +11.6% yoy). The contraction in exports emanated from broad-based deceleration, due to seasonal factors and ringgit appreciation. The contraction in both exports and imports led to a relatively stable trade surplus of RM9.0bn (Jan: RM9.7bn). Notwithstanding the decline in February exports, we continue to expect exports to improve but grow at a more moderate pace in 2018 compared to 2017 as base effect fades.

DATA HIGHLIGHTS

After growing at a double-digit pace in January, exports declined by -2.0% YoY (Jan: +17.9% YoY) missing median estimate of +8.0% YoY. Imports also contracted by - 2.8% YoY (Jan: +11.6% YoY).

Trade surplus remained relatively steady at RM9.0bn (Jan: RM9.7bn) as both exports and imports deteriorated in the month.

Exports to most major countries deteriorated in February. By destination, exports to the US continued to increase, albeit at a slower pace of +3.3% YoY (Jan: +8.7% YoY). Meanwhile, exports to other major economies such as EU, Japan and China contracted (-3.0% YoY; -17.2% YoY; -9.7% YoY respectively; Jan: +13.9% YoY; +3.3% YoY; +17.9% YoY respectively).

The slower growth in exports emanated from a broad-based deceleration across commodity and manufacturing sectors. The slowdown in growth was due to the different timing of CNY holiday, shorter working month that was further compounded by ringgit appreciation. In USD terms, Malaysia exports remained in the double-digit territory (+11.4% YoY; Jan: +32.9% YoY).

Exports of commodity related products declined by -2.0% YoY (Jan: +6.2% YoY) due to volume and price factors. Volume of crude petroleum contracted, but at a smaller pace of -6.6% (Jan: -11.5% YoY). Likewise, LNG export volume also declined by -11.2% YoY (Jan: +10.2% YoY).

Manufactured export growth turned around to register a decline of -2.0% YoY (Jan: +22.0% YoY). Chemical product declined by -3.4% YoY (Jan: +23.4% YoY), similar to machinery exports (-7.8% YoY; Jan: +11.5% YoY). Meanwhile, E&E exports slowed to +0.1% YoY (Jan: +27.1% YoY) as well as optical exports (+11.7% YoY; Jan: +18.0% YoY). Nevertheless, global semiconductor sales continued to demonstrate consistent growth (+21.0% YoY; Jan: +22.7% YoY).

Imports declined by -2.8% YoY (Jan: +11.6% YoY), due to contraction in intermediate goods (-14.7% YoY; Jan: -1.6% YoY) that offset the increase in capital goods (+6.2% YoY; Jan: -3.2% YoY) and consumption imports (+12.7% YoY; Jan: +9.9% YoY).

HLIB’s VIEW

The decline in Malaysia’s exports in February was partly driven by difference in CNY timing, shorter working hours and ringgit appreciation. On a USD basis, exports continued to grow at a healthy pace. Global leading indicators such as global chip sales and PMI continue to remain in expansionary mode. Nevertheless, we anticipate growth to be more moderate in 2018 as base effect fades.

Source: Hong Leong Investment Bank Research - 6 Apr 2018