Exports rebounded by +2.2% YoY (Feb: -2.0% YoY), slightly higher than expectations of +2.0% YoY. However, imports contracted by a larger magnitude of -9.6% YoY (Feb: -2.8% YoY). The faster growth in exports emanated from a rebound in manufacturing sector that offset the contraction in commodity sector while decline in imports was broad-based. Higher trade surplus in 1Q 2018 (RM33.4bn; 1Q 2017: RM18.9bn) suggest external trade continued to contribute to economic activity in 1Q 2018.

DATA HIGHLIGHTS

Exports rebounded by +2.2% YoY (Feb: -2.0% YoY), slightly higher than median estimate of +2.0% YoY. However, imports also contracted by a larger magnitude of -9.6% YoY (Feb: -2.8% YoY). Trade surplus was higher at RM14.7bn (Feb: RM9.0bn as exports performed better during the month.

Exports to most major countries declined except to the EU. By destination, exports to the US declined slightly by -0.1% YoY (Feb: +3.3% YoY). Exports continued to contract, albeit at a slower pace in Japan (-3.5% YoY; Feb: -17.2% YoY), China (-4.7% YoY; Feb: -9.7% YoY) as well as to ASEAN countries (-2.8% YoY; Feb: -5.7% YoY). On the other hand, exports to the EU rebounded by +5.3% YoY (Feb: -3.0% YoY) as well to other countries such as Hong Kong and Taiwan.

The faster growth in exports emanated from a rebound in manufacturing sector that offset the contraction in commodity sector. The contraction in commodity sector was partly due to high base effect a year ago following the recovery of oil prices from the trough in 2016. In USD terms, Malaysia exports remained in the double-digit territory (16.0% YoY; Feb: +11.4% YoY).

Exports of commodity related products declined by -8.9% YoY (Feb: -2.0% YoY) due partly to base effect. Export volume of refined petroleum declined by -5.6% YoY (Feb: +18.4% YoY) while price of refined petroleum contracted by -3.2% YoY (Feb: +9.0% YoY). Volume of LNG declined by -13.3% YoY (Feb: -11.2% YoY) while export price of LNG grew by +11.4% YoY (Feb: -0.7% YoY).

Manufactured export growth turned around to register a growth of +5.8% YoY (Feb: -2.0% yoy). Chemical product improved by +7.8% YoY (Feb: -3.4% YoY), similar to machinery exports (+4.3% YoY; Feb: -7.8% YoY)). Meanwhile, E&E exports accelerated to +8.7% YoY (Feb: +0.1% YoY). Global semiconductor sales also continued to demonstrate double-digit expansion (+20.0% YoY; Feb: +21.0% YoY). Meanwhile optical exports contracted (-0.2% YoY; Feb: +11.7% YoY).

Imports declined by -9.6% YoY (Feb: -2.8% YoY), due to broad-based contraction. Intermediate goods declined by -14.4% YoY (Feb: -14.7% YoY). Capital goods contracted by -30.5% YoY (Feb: +6.2% YoY) as well as consumption imports (-12.4% YoY; Feb: +12.7% YoY).

HLIB’s VIEW

The rebound in March exports was expected as temporary seasonal factors dissipated. Trade surplus amounted to RM33.4bn in 1Q 2018, higher than trade surplus recorded in 1Q 2017 (RM18.9bn). The continued expansion in quarterly data suggests external trade continued to contribute to economic growth in 1Q 2018.

Source: Hong Leong Investment Bank Research - 7 May 2018