Exports accelerated sharply to +17.7% YoY (Sep: +6.7% YoY), beating market expectations of +5.8% YoY. Imports rebounded strongly by +11.4% YoY (Sep: - 2.8% YoY). The strong exports performance was driven by expansions in both commodity and manufactured exports while imports were largely driven by recovery in consumption, intermediate goods and other imports. As a result, the trade surplus reached a record high of RM16.3bn (Sep: RM15.2bn).

DATA HIGHLIGHTS

Exports continued its positive growth, recording an acceleration of +17.7% YoY (Sep: +6.7% YoY), beating market expectations of +5.8% YoY. Meanwhile, imports strongly rebounded by +11.2% YoY (Sep: -2.8% YoY). Consequently, the trade surplus widened to a record high of RM16.3bn (Sep: RM15.2bn). The increase in exports was in line with regional trend. Domestically, the sharp acceleration in Malaysia’s exports may have been further boosted by the higher number of working days in October 2018 compared to October 2017 as the Festival of Lights was celebrated in October 2017 and November 2018.

Exports to major countries broadly improved, with accelerations in exports to the US (+7.6% YoY; Sep: +0.1% YoY), EU (+8.5% YoY; Sep: +3.1% YoY) and ASEAN (+16.0% YoY; Sep: +6.2% YoY). Exports to Japan (+10.2% YoY; Sep: -10.7% YoY) and China (+33.0% YoY; Sep: -0.6% YoY) strongly rebounded.

Commodity-related exports jumped by +18.1% YoY (Sep: +3.5% YoY). Export volume of palm oil products rose (+6.3% YoY; Sep: +1.4% YoY). Export volume of refined petroleum products slowed (+6.8% YoY; Sep: +7.4% YoY) and export volume of crude petroleum declined (-4.4% YoY; Sep: +11.9% YoY). Average unit value declined for palm oil products (-17.1% YoY; Sep: -15.5% YoY) and crude petroleum (- 12.3% YoY; Sep: +54.5% YoY). Nevertheless, average unit value increased for refined petroleum products (+28.6% YoY; Sep: +12.2% YoY) and LNG (+29.5% YoY; Sep: +20.7% YoY).

Exports of manufactured goods expanded by +17.6% YoY (Sep: +7.6% YoY), driven by faster growth in E&E (+23.3% YoY; Sep: +6.5% YoY), metals (+29.0% YoY; Sep: - 2.2% YoY) and machinery exports (+4.2% YoY; Sep: +1.8% YoY). Notwithstanding the strong E&E exports, global semiconductor sales continued to grow at a slower pace (+12.7% YoY; Sep: +13.8% YoY). Re-exports, which account for 21.6% of total exports also rose strongly by +43.8% YoY (Sep: +26.2% YoY).

Imports rebounded by +11.4% YoY (Sep: -2.8% YoY) due to a bounce back in intermediate imports (+1.0% YoY; Sep: -9.3% YoY) and consumption imports (+7.6% YoY; Sep: -10.0% YoY) which offset the slower decline in capital imports (-1.6% YoY; Sep: -25.2% YoY). Intermediate imports rose on account of primary fuel and lubricants. Consumption imports were higher due to the rise in non-durable goods, particularly pharmaceutical products. Other imports which account for 31% of total imports also recorded an acceleration to +43.1% YoY (Sep: +32.4% YoY), in line with faster growth in re-exports activity (+43.8% YoY; Sep: +26.2% YoY).

HLIB’s VIEW

Going forward, we expect export growth to continue its positive momentum, albeit at a slower pace. Despite the 90-day trade truce between US and China, there continues to be uncertainty on a trade resolution while rising volatility in the financial market remains key downside risks to trade activity.

Source: Hong Leong Investment Bank Research - 6 Dec 2018