Exports fell -5.3% YoY in February (Jan: +3.1% YoY), missing market expectation of +2.3% YoY growth. Meanwhile, imports fell -9.4% YoY (Jan: +1.0% YoY). The fall in exports was attributed to contractions in manufacturing and commodity exports, while imports dropped due to broad-based decline. Despite the fall in trade figures, trade surplus was sustained at RM11.1bn (Jan: RM11.5bn).

DATA HIGHLIGHTS

February exports recorded a -5.3% YoY fall (Jan: +3.1% YoY), missing market expectation of +2.3% YoY growth. This was the steepest decline since October 2016. Meanwhile, imports fell -9.4% YoY (Jan: +1.0% YoY). Trade surplus narrowed slightly to RM11.1bn (Jan: RM11.5bn). The decline in exports was largely in line with the regional trend, except Singapore.

Exports to major markets broadly declined except to EU, which moderated to +3.7% YoY (Jan: +4.3% YoY). Exports to Japan declined at a slower pace (-2.9% YoY; Jan: -5.0% YoY), while exports to US (-8.9% YoY; Jan: +9.4% YoY), ASEAN (-7.8% YoY; Jan: +3.3% YoY) and China (-1.6% YoY; Jan: +9.1% YoY) fell into negative territory.

Commodity-related exports declined (-17.1% YoY; Jan: -6.1% YoY) on the back of lower palm oil and crude petroleum exports. Palm oil exports declined due to lower average unit value (AUV) (-14.9% YoY; Jan: -20.9% YoY) that offset the positive export volume (+1.7% YoY; Jan: +4.5% YoY). Meanwhile crude petroleum declined due to both lower AUV (-19.4% YoY; Jan: -21.0% YoY) and export volume (-16.8% YoY; Jan: +3.7% YoY).

Manufactured exports slid -1.4% YoY (Jan: +5.9% YoY) due to contractions in metal (- 19.0% YoY; Jan: -0.9% YoY), optical (-17.4% YoY; Jan: +6.9% YoY), machinery (- 6.6% YoY; Jan: -1.6% YoY) and chemical exports (-4.2% YoY; Jan: +16.5% YoY) while E&E exports continued to grow, albeit at a slower pace (+4.9% YoY; Jan: +8.2% YoY). On a global level, global chip sales also recorded a decline (-10.6% YoY; Jan: - 5.7% YoY), signalling weakness in the semiconductor cycle. Nevertheless, latest sentiment indicators have started to shown some tentative signs of stabilisation (global PMI manufacturing: 50.6; Jan: 50.6).

Imports declined by -9.4% YoY (Jan: +1.0% YoY) amid lower imports of capital (- 14.9% YoY; Jan: -3.3% YoY), intermediate (-2.8% YoY; Jan: -0.8% YoY) and consumption goods (-11.6% YoY; Jan: +3.3% YoY). Capital goods declined due to lower imports of industrial transport equipment, particularly aircraft and parts. Intermediate imports fell following lower imports of processed industrial supplies, particularly iron and steel, whereas consumption goods declined due to lower durable goods imports.

Trade surplus amounted to RM22.6bn in Jan-Feb 2019, higher than RM18.7bn reached in the same period last year.

HLIB’s VIEW

The weaker trade performance is a reflection of slower global demand, compounded by seasonal distortions. While there are some tentative signs of stabilisation on global front, a more durable recovery would require a resolution of risk factors. Going forward, trade and investment activity should continue to be subdued, pending developments in the US-China trade negotiations.

Source: Hong Leong Investment Bank Research - 5 Apr 2019