Exports slipped -0.5% YoY in March (Feb: -5.3% YoY), better than the consensus estimate of -3.4% YoY. Meanwhile, imports declined, albeit at a slower pace of -0.1% YoY (Feb: -9.4% YoY). The decline in exports was attributed to a contraction in manufacturing exports which offset the rebound in commodity exports. Imports fell following decline in capital goods that offset the rebound in consumption and intermediate goods. Nevertheless, trade surplus widened further to RM14.4bn (Feb: RM11.5bn).

DATA HIGHLIGHTS

In March, exports fell at a slower pace of -0.5% YoY (Feb: -5.3% YoY), better than the consensus estimate of -3.4% YoY. Meanwhile, imports fell by a marginal -0.1% YoY (Feb: -9.4% YoY). On a monthly basis, exports recorded the highest growth since April 2010 (Mar: +26.2%; Feb: -22.0%) while imports rebounded by +25.4% (Feb: - 24.8%). Trade surplus widened to RM14.4bn (Feb: RM11.5bn). The decline in exports was also largely in line with the regional trend, except China.

Exports to China rebounded sharply (+11.8% YoY; Feb: -1.6% YoY), mainly driven by higher exports of petroleum, E&E and chemical products. Exports to ASEAN also picked up (+1.3% YoY; Feb: -7.8% YoY) while exports to Japan (-11.3% YoY; Feb: - 2.9% YoY), EU (-5.0% YoY; Feb: +3.7% YoY) and US (-3.6% YoY; Feb: -8.9% YoY) declined.

Exports for commodity-related products rebounded (+0.5% YoY; Feb: -17.2% YoY) due to higher LNG exports and refined petroleum products. The rise in LNG exports was attributed to higher export volume (+10.3% YoY; Feb: -8.7% YoY) and average unit value (AUV) (+6.3% YoY; Feb: +18.9% YoY), while higher exports for refined petroleum products was due mainly to higher AUV (+12.7% YoY; Feb: -1.8% YoY).

Manufactured exports slipped -0.8% YoY (Feb: -1.4% YoY), largely due to contractions in E&E exports. Excluding E&E, exports for manufactured products posted a growth (+0.3% YoY; Feb: -6.9% YoY). Exports fell for E&E (-1.9% YoY; Feb: +4.9% YoY), machinery (-9.0% YoY; Feb: -6.6% YoY) and metal (-3.7% YoY; Feb: - 18.9% YoY). This offset recoveries in chemical (+4.1% YoY; Feb: -4.3% YoY) and optical exports (+19.2% YoY; Feb: -17.4% YoY).

Imports contracted, at a slower pace of -0.1% YoY (Feb: -9.4% YoY) due to a slower decline in capital imports (-11.8% YoY; Feb: -15.0% YoY) which offset recoveries in intermediate (+3.2% YoY; Feb: -2.8% YoY) and consumption imports (+10.5% YoY; Feb: -11.6% YoY). Capital imports declined due mainly to lower imports of industrial transport equipment, particularly ships, boats and floating structures. Meanwhile, intermediate imports were driven by higher primary fuel and lubricant imports. Consumption imports were higher due to imports of durables mainly for jewellery.

HLIB’s VIEW

On the global front, manufacturing activity has been negatively affected by US-China trade relations uncertainty. Consequently, global PMI manufacturing continued to trend downwards in April 50.3 (Mar: 50.5). This trend is expected to continue, pending developments in the US-China. Closer to home, Malaysia was also negatively affected with exports recording a decline (-0.9% YoY). Nevertheless, the larger drop in imports (-2.9% YoY) have led to wider trade surplus of RM37.4bn (1Q18: RM33.4bn; 4Q18: RM34.8bn) which indicates that net exports could contribute to overall 1Q19 GDP (to be released on 16th May 2019).

Source: Hong Leong Investment Bank Research - 6 May 2019