Exports moderated to +3.1% YoY (Dec: +5.1% YoY), beating market expectations of a -0.6% YoY decline. Meanwhile, import growth sustained at +1.0% YoY (Dec: +1.0% YoY). Exports softened due to moderation in manufactured exports and slower decline in commodity exports. Imports were steady on the back of moderation in consumption goods which offset the decline in capital and intermediate goods. Consequently, the trade surplus widened to RM11.5bn (Dec: RM10.7bn).

DATA HIGHLIGHTS

In January, exports softened to +3.1% YoY (Dec: +5.1% YoY), exceeding market expectations of -0.6% YoY. Imports were sustained at +1.0% YoY (Dec: +1.0% YoY). Following this, the trade surplus widened to RM11.5bn (Dec: RM10.7bn).

Exports to China recovered strongly, recording a +9.1% YoY growth (Dec: -0.5% YoY) due to higher exports of LNG, chemical and palm oil products. Exports to EU rebounded by +4.3% YoY (Dec: -4.9% YoY). Exports to ASEAN rose +3.3% YoY (Dec: +2.6% YoY) whereas exports to US moderated to +9.4% (Dec: +13.5% YoY). Exports to Japan contracted at a slower pace of -5.0% YoY (Dec: -6.4% YoY).

Commodity-related exports registered a slower decline of -6.1% YoY (Dec: -7.9% YoY), mainly supported by a sharp rebound in LNG exports (+37.5% YoY; Dec: -2.7% YoY) due to higher volume (+16.3% YoY; Dec: -15.9% YoY) and average unit value (AUV) (+18.3% YoY; Dec: +15.7% YoY). This partly offset the decline in palm oil products and crude petroleum due to contraction in AUV of -20.9% YoY (Dec: -23.3% YoY) and -21.0% YoY (Dec: -19.3% YoY) respectively amid continued growth in volume.

Exports of manufactured goods eased to +5.9% YoY (Dec: +9.3% YoY). This was driven by a moderation in E&E exports (+8.2% YoY; Dec: +14.2% YoY), in line with deceleration of global chip sales (+0.6% YoY; Dec: +9.1% YoY). In addition, moderation was also seen in chemical exports (+16.7% YoY; Dec: +36.6% YoY) and optical exports (+7.1% YoY; Dec: +14.6% YoY). Machinery exports (-1.5% YoY; Dec: +7.4% YoY) and metal exports (-0.9% YoY; Dec: -5.5% YoY) registered contraction.

Imports were sustained at +1.0% YoY (Dec: +1.0% YoY) as the moderation in consumption imports (+3.3% YoY; Dec: +5.7% YoY) offset the decline in capital (-3.3% YoY; Dec: -21.8% YoY) and intermediate imports (-0.8% YoY; Dec: +2.8% YoY). Capital imports declined following lower imports of aircraft and parts while intermediate imports fell due to lower imports of parts and accessories of capital goods particularly electrical machinery, equipment and parts. The contraction is capital and intermediate imports underlie potential weakness in investment activity.

Despite most regional economies recording negative export figures, Malaysia’s exports bucked the trend. This is attributed to the weaker ringgit (USD/MYR in Jan ‘19: 4.1179; Jan ’18: 3.9561) which boosted Malaysia’s exports in ringgit terms. In USD term, Malaysia’s exports declined by -0.9% YoY (Dec: +2.9% YoY).

HLIB’s VIEW

Latest PMI manufacturing indicators continue to indicate weakness in global trade activity which is expected to affect Malaysia’s external sector in the short-term. Nevertheless, the modest recovery in commodity sectors and weaker ringgit in Feb 2019 (USD/MYR: 4.0748) compared to Feb 2018 (USD/MYR: 3.9147) is anticipated to limit the overall negative effect.

Source: Hong Leong Investment Bank Research - 5 Mar 2019