Exports grew at a slower pace of +3.4% YoY (Apr: +14.0% YoY) lower than expectations of +6.4% YoY. Imports also decelerated to +0.1% YoY (Apr: +9.1% YoY). The slower growth in exports emanated from deceleration in manufactured and commodity exports. Import growth slowed following the decline in capital, intermediate and consumption imports. Other imports which consist mostly of re-exports registered continued growth. Higher trade surplus in Apr-May 2018 (RM21.2bn; Apr-May 2017: RM14.2bn) suggest external trade continued to contribute to economic activity. We maintain our expectation for GDP to be more moderate compared to 2017.

DATA HIGHLIGHTS

Exports rose at a slower pace (+3.4% YoY; Apr: +14.0% YoY), lower than median estimate of +6.4% YoY. Imports also moderated sharply to +0.1% YoY (Apr: +9.1% YoY). Trade surplus was lower at RM8.1bn (Apr: RM13.1bn).

Exports to most major countries deteriorated except to Japan. By destination, exports declined to the US (-5.6% YoY; Apr: +1.7% YoY) and ASEAN (-1.8% YoY; Apr: +13.1% YoY). Meanwhile, exports to the EU moderated (+11.4% YoY; Apr: +19.4% YoY), as well as to China (+7.5% YoY; Apr: +22.0% YoY). However, exports to Japan rebounded by +16.1% YoY after declining in the previous month (-21.4% YoY).

Exports of commodity related products moderated to +4.7% YoY (Apr: +5.1% YoY). Export volume of refined petroleum declined by -5.8% YoY (Apr: +26.2% YoY) as well as export volume of palm oil product (-4.6% YoY; Apr: +18.6% YoY). Meanwhile, export volume of crude petroleum strengthened (+19.3% YoY; Apr: +11.0% YoY) and export volume of LNG accelerated (+68.7% YoY; Apr: -3.5% YoY). Export prices improved during the month. Crude petroleum export price grew by +22.2% YoY (Apr: +10.6% YoY), refined petroleum product export price rose by +16.8% YoY (Apr: +10.0% YoY), while LNG export price declined at a slower pace (-4.6% YoY; Apr: - 9.3% YoY). Similarly, export price for palm oil also declined by smaller magnitude of - 11.3% YoY (Apr: -15.5% YoY).

Manufactured export growth decelerated to +3.0% YoY (Apr: +16.6% YoY). Machinery exports declined by -12.7% YoY (Apr: +2.6% YoY) while E&E exports slowed to +2.2% YoY (Apr: +21.4% YoY). However, global semiconductor sales continued to demonstrate double-digit expansion (+21.0% YoY; Apr: +20.0% YoY). Metal exports grew strongly for the second consecutive month (+44.7% YoY; Apr: +42.9% YoY).

Imports slowed to register an increase of +0.1% YoY (Apr: +9.1% YoY) due to decline in capital imports (-0.7% YoY; Apr: +4.7% YoY), intermediate imports (-5.3% YoY; - 11.9% YoY) and consumption imports (-10.2% YoY; Apr: -1.6% YoY). However, other imports which account mostly for re-exports registered continued growth (+20.5% YoY; Apr: +77.9% YoY)

HLIB’s VIEW

Trade surplus amounted to RM21.2bn in Apr-May 2018, higher than trade surplus recorded during the same period last year (RM14.2bn) which suggest external trade continued to contribute to economic growth in 2Q 2018. Nevertheless, we maintain our expectation for GDP in 2018 (5.2%) to be more moderate compared to 2017.

Source: Hong Leong Investment Bank Research - 6 Jul 2018