Exports grew at a faster pace of +7.6% YoY (May: +3.4% YoY) lower than expectations of +10.3% YoY. Imports accelerated to +14.9% YoY (May: +0.1% YoY). The faster growth in exports emanated from acceleration in manufactured exports that offset the decline in commodity exports. Import growth accelerated following broad-base increase, also partly supported by low base effect. Higher trade surplus in Apr-June 2018 (RM27.2bn; Apr-Jun 2017: RM24.1bn) suggest external trade continued to contribute to economic activity. Nevertheless, we maintain our expectation for GDP to be more moderate compared to 2017 due to slowing momentum in most major economies.

DATA HIGHLIGHTS

In June, exports rose at a faster pace (+7.6% YoY; May: +3.4% YoY), lower than median estimate of +10.3% YoY. Imports accelerated sharply to +14.9% YoY (May: +0.1% YoY). Trade surplus was lower at RM6.0bn (May: RM8.1bn). Exports to the US and Japan declined.

Exports to the US declined, albeit at a slower pace of -1.9% YoY (May: -5.6% YoY). Exports to Japan contracted by -14.5% YoY after growing strongly by +16.1% YoY in the previous month. Meanwhile, exports to EU, China and ASEAN continued to grow. Exports to EU moderated to +5.6% YoY (May: +11.4% YoY) while exports to China accelerated to +16.9% YoY (May: +7.5% YoY)) and exports to ASEAN turned around to record growth of +7.4% YoY (May: - 1.8% YoY).

Exports of commodity related products dipped slightly to the negative territory in June (-0.8% YoY; May: +4.7% YoY) due primarily to decline in export volume. Export volume of crude petroleum declined by -8.6% YoY (May: +19.3% YoY) while export volume of LNG contracted by -31.9% YoY (May: +68.7% YoY). Likewise, export volume of palm oil product declined by -9.9% YoY (May: -4.6% YoY). Meanwhile, export price continued to increase. Export price of crude petroleum rose by +37.2% YoY (May: +22.2% YoY), export price of refined petroleum product increased by +19.9% YoY (May: +16.8% YoY).

Manufactured export growth accelerated to +10.2% YoY (May: +3.0% YoY). Machinery exports rebounded to +9.6% YoY (May: -12.7% YoY) while E&E exports rose at a faster pace of +6.9% YoY (May: +2.2% YoY). Global semiconductor sales continued to demonstrate double-digit expansion (May: +21.0% YoY; Apr: +20.0% YoY). Metal exports also grew strongly (+42.9% YoY; May: 44.7% YoY).

Imports accelerated to +14.9% YoY (May: +0.1% YoY). The increase in imports was reflected in the rebound in capital imports (+14.1% YoY; May: -0.7% YoY), intermediate imports (+3.1% YoY; May: -5.3% YoY) and consumption imports (+4.9% YoY; May: -10.2% YoY).

HLIB’s VIEW

Trade surplus amounted to RM27.2bn in Apr-June 2018, higher than trade surplus recorded during the same period last year (RM24.1bn) which suggest external trade continued to contribute to economic growth in 2Q 2018. Nevertheless, we maintain our expectation for GDP in 2018 to be more moderate compared to 2017.

Source: Hong Leong Investment Bank Research - 6 Aug 2018