Exports grew at a faster pace of +9.4% YoY (June: +7.9% YoY) higher than expectations of +4.7% YoY. Imports moderated to +10.3% YoY (June: +15.9% YoY). The faster growth in exports emanated from acceleration in manufactured exports that offset the decline in commodity exports. Import growth moderated due to the slowdown in capital imports and slight decline in intermediate imports. Higher trade surplus in Jan-July 2018 (RM68.8bn; Jan-July 2017: RM53.1bn) 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 July, exports rose at a faster pace (+9.4% YoY; June: +7.9% YoY), higher than median estimate of +4.7% YoY. Imports moderated to +10.3% YoY (June: +15.9% YoY). Trade surplus was higher at RM8.3bn (June: RM6.0bn).

Exports to EU and ASEAN moderated while exports to Japan declined further. Exports to EU moderated to +2.1% YoY (June: +5.5% YoY) and to ASEAN slowed to +1.2% YoY (June: +7.4%). Exports to Japan declined by -17.1% YoY (June: -14.5%). Meanwhile, exports to China and US grew at a faster pace. Exports to China accelerated to +37.5% YoY (June: +16.8% YoY) while exports to US rebounded to +6.7% YoY from a decline of -2.0% YoY in the previous month.

Exports of commodity related products declined further in July (-8.1% YoY; June: - 1.1% YoY) due primarily to decline in export volume. Export volume of refined petroleum products declined by -29.4% YoY (June: +17.3% YoY) while export volume of LNG contracted by -37.9% YoY (June: -31.9% YoY). Likewise, export volume of palm oil product declined by -5.4% YoY (June: -9.9% YoY). Meanwhile, export price improved during the month. Export price of crude petroleum rose by +43.6% YoY (June: +37.2% YoY) while export price of refined petroleum product increased by +24.2% YoY (June: +19.9% YoY) and LNG export price rose by +2.7% YoY (June: +1.0%). Palm oil export price declined by a smaller magnitude of -8.8% YoY (June: - 11.6%).

Manufactured export growth accelerated to +15.2% YoY (June: +10.2% YoY) driven by E&E exports (+23.6% YoY; June: +6.9% YoY) and rebound in chemical export (+19.3% YoY; Jun: -12.6% YoY). Global semiconductor sales continued to demonstrate double-digit expansion albeit at a slower pace (July: +17.4% YoY; June: +20.5% YoY). Metal exports moderated to +23.3% YoY (June: 42.9% YoY).

Imports moderated to +10.3% YoY (June: +15.9% YoY). Capital imports decelerated to +4.7% YoY (June: +14.7% YoY) while intermediate imports declined by -0.1% YoY (June: +3.0% YoY) due to lower imports of parts and accessories of capital goods. This offset the acceleration in consumption imports +11.2% YoY (June: +5.0% YoY) that was driven by imports of semi-durable items such as apparel and clothing.

HLIB’s VIEW

Trade surplus amounted to RM68.8bn in Jan-July 2018, higher than trade surplus recorded during the same period last year (RM53.1bn) which suggest external trade continued to contribute to economic growth. Nevertheless, we maintain our expectation for GDP in 2018 to be more moderate compared to 2017 due to slowing momentum in most major economies.

Source: Hong Leong Investment Bank Research - 6 Sept 2018