Exports rebounded by +6.7% YoY (Aug: -0.3% YoY), matching market expectations. Meanwhile, imports fell -2.7% YoY (Aug: +11.2% YoY) following normalisation of imports as temporary factors fade. The increase in exports stemmed from rebound in commodity exports and higher growth in manufactured exports. As a result, trade surplus widened sharply to RM15.3bn (Aug: RM1.6bn).

DATA HIGHLIGHTS

Exports rebounded in September (+6.7% YoY; Aug: -0.3% YoY), matching the median estimate. Imports declined by -2.7% YoY (Aug: +11.2% YoY) as temporary factors fade (temporary consumption tax holiday period, one-off imports such as ships and boats). Following the modest increase in exports and significant decline in imports, trade surplus recorded the highest value since September 2008 at RM15.3bn (Aug: RM1.6bn).

Exports to most major countries improved except for China. Exports to the US rose marginally by +0.1% YoY (Aug: -2.0% YoY), while exports to the EU and ASEAN rebounded (+3.1% YoY and +6.2% YoY respectively; -8.9% YoY and -0.7% YoY respectively). Meanwhile exports to China declined marginally (-0.6% YoY; Aug: +4.5% YoY).

Commodity-related exports rebounded to +4.0% YoY (Aug: -5.3% YoY). Export volume of refined petroleum products picked up to +7.4% YoY (Aug: -18.4% YoY), as well as export volume of palm oil products (+1.4% YoY; Aug: -9.9% YoY). Meanwhile, export volume of crude petroleum continued to expand (+11.9% YoY; Aug: +17.2% YoY). Export volume of LNG registered a smaller pace of decline (-15.6% YoY; Aug: - 29.6% YoY). Export price of crude petroleum rose by +38.1% YoY (Aug: +45.7% YoY) while export price of LNG grew at a faster pace of +20.7% YoY (Aug: +13.1% YoY). Nevertheless, export price of palm oil product contracted at a faster pace of -15.5% YoY (Aug: -14.5% YoY).

Growth of manufactured exports accelerated to +7.4% YoY (Aug: +1.2% YoY) due mainly to faster growth in E&E exports (+6.5% YoY; Aug: +3.2% YoY) and pick up in machinery exports (+1.8% YoY; Aug: -7.1% YoY). Global semiconductor sales continued to grow, albeit at a slower pace (+13.8% YoY; Aug: +14.9% YoY). The moderation in growth from Europe, Japan and Asia Pacific weighed on total global semiconductor sales while sales from US and China remained strong.

Imports declined by -2.7% YoY (Aug: +11.2% YoY). Capital imports contracted by - 25.2% YoY after growing by +25.3% YoY in the previous month to take into account one-off lumpy items such as ships and boats. Intermediate and consumption imports also decreased by -9.3% YoY and -10.0% YoY respectively (Aug: +4.3% YoY; +14.2% YoY respectively) reflecting lower imports of parts and accessories of capital goods and semi-durable items that may have been front-loaded during the consumption tax-free period in Jun – Aug 2018.

HLIB’s VIEW

On a quarterly basis, trade surplus was slightly lower at RM25.2bn (3Q17: RM26.3bn) which suggest external trade may have weighed on overall growth. Going forward, we expect export growth to remain in expansionary mode, albeit at a slower pace. The protracted trade disputes between US and PR China and the rising volatility in the financial market remain key downside risks.

Source: Hong Leong Investment Bank Research - 7 Nov 2018