April’s exports rebounded by +1.1% YoY (Mar: -0.5% YoY), beating the -2.1% YoY consensus estimate. Similarly, imports rebounded by +4.4% YoY (Mar: - 0.1% YoY). The improved export performance was driven by recovery in manufacturing exports which offset the decline in commodity exports, while broad-based increase across capital, intermediate and consumption imports supported the rebound in imports. Consequently, the trade surplus narrowed to RM10.9bn (Mar: RM14.4bn). Nevertheless, Malaysia’s exports were boosted by the weaker ringgit, which would otherwise have contracted in USD terms.

DATA HIGHLIGHTS

Exports rebounded by +1.1% YoY (Mar: -0.5% YoY) in April after two consecutive annual declines since Feb 2019, beating the consensus estimate of -2.1% YoY. Meanwhile, imports also recorded a rebound of +4.4% YoY (Mar: -0.1% YoY). Consequently, the trade surplus narrowed to RM10.9bn (Mar: RM14.4bn).

Exports improved to US (+3.1% YoY; Mar: -3.6% YoY), Japan (+7.7% YoY; Mar: - 11.3% YoY) and ASEAN (+7.2% YoY; Mar: +1.3% YoY), mainly driven by higher E&E exports to US and ASEAN and higher LNG exports to Japan. However, exports to EU (-8.6% YoY; Mar: -5.0% YoY) and China (-6.9% YoY; Mar: +11.8% YoY) declined.

Commodity-related exports declined by -0.9% YoY (Mar: +0.6% YoY) as the rise in exports of LNG and refined petroleum products was offset by the decline in crude petroleum and palm oil product exports. Crude petroleum exports fell on the back of lower export volume (-37.4% YoY; Mar: -35.2% YoY) while exports of palm oil products fell due to lower average unit value (AUV) (-15.5% YoY; Mar: -19.7% YoY).

Exports of manufactured products rebounded by +1.7% YoY (Mar: -0.8% YoY), driven by a rebound in exports of E&E (+3.9% YoY; Mar: -1.9% YoY) and machinery (+0.8% YoY; Mar: -9.1% YoY), as well as faster growth in optical exports (+19.5% YoY; Mar: +18.9% YoY). This offset the moderation in chemical exports (+3.9% YoY; Mar: +4.1% YoY) and steep decline in metal exports (-23.0% YoY; Mar: -3.7% YoY).

Imports rebounded by +4.4% YoY (Mar: -0.1% YoY) during the month, boosted by recovery in capital imports (+5.7% YoY; Mar: -11.9% YoY) and higher imports of intermediate (+20.3% YoY; Mar: +3.2% YoY) and consumption goods (+18.9% YoY; Mar: +10.5% YoY). The recovery in capital imports was mainly attributed to higher imports of electrical machinery, equipment and parts, while intermediate imports jumped following higher imports of processed industrial supplies. Meanwhile, consumption imports were driven by higher imports of non-durables.

Malaysia’s exports bucked the regional trend which saw negative export figures across all regional economies. However, this was attributed to the weaker ringgit (USD/MYR 4.1144; Apr 18: USD/MYR 3.8874) which gave Malaysia’s exports a boost in ringgit terms. In USD terms, Malaysia’s exports declined at a slower pace of -4.4% YoY (Mar: -4.8% YoY).

HLIB’s VIEW

Against the backdrop of increased trade tensions, trade and investment activity is expected to be subdued as business confidence wavers. The World Trade Outlook Indicator also suggests global trade growth will likely remain weak in 2Q19, with the latest reading maintained at 96.3 (Feb: 96.3). Readings below the baseline value of 100 signals below-trend trade expansion into 2Q19. Nevertheless, we expect BNM to maintain the OPR at 3.00% unless external conditions deteriorate significantly.

Source: Hong Leong Investment Bank Research - 4 Jun 2019