Exports Rebounded by +2.7% YoY in December (Nov: -5.5% YoY), Beating Market Expectations of a -2.5% YoY Decline. Similarly, Imports Also Posted a Rebound of +0.9% YoY (Nov: -3.6% YoY). Exports Were Mainly Driven by Higher Palm Oil and Petroleum Products, While Imports Rose on the Back of Higher Intermediate and Consumption Goods. Trade Surplus Widened to RM12.6bn (Nov: RM6.6bn). In 2019, Exports Decreased Marginally by -1.7% YoY (2018: +7.3% YoY) While Imports Declined by -3.5% YoY (2018: +5.2% YoY). Nevertheless, Trade Surplus Continued to Widen (RM137.4bn; 2018: RM123.8bn).

DATA HIGHLIGHTS

Exports rebounded by +2.7% YoY in December (Nov: -5.5% YoY), the fastest rate of growth in 2019, beating market expectations of a -2.5% YoY decline. Meanwhile, imports also recovered (+0.9% YoY; Nov: -3.6% YoY). Consequently, the trade surplus widened to RM12.6bn (Nov: RM6.6bn).

Exports to major markets including China (+17.8% YoY; Nov: +4.1% YoY) and US (+15.1% YoY; Nov: +6.5% YoY) accelerated, while exports to ASEAN rebounded by +3.2% YoY (Nov: -8.8% YoY). Meanwhile, exports to Japan (-13.9% YoY; Nov: - 16.0% YoY) and EU (-3.8% YoY; Nov: -4.3% YoY) continued to decline for the fourth consecutive month. In 2019, exports to US strengthened (+5.5% YoY; 2018: +2.3% YoY) but weakened to China (+0.3% YoY; 2018: +10.3% YoY), EU (-2.9% YoY; Nov: +3.5%) and Japan (-7.3% YoY; 2018: -8.6% YoY). The positive growth to US reflected increase in electrical machinery and equipment, as a result of trade diversion from the US-China trade war.

Commodity-related exports posted a recovery (+7.0% YoY; Nov: -17.8% YoY) amid a strong turnover in palm oil (+34.2% YoY; Nov: -3.5% YoY) and petroleum products (+36.5% YoY; Nov: -16.2% YoY) that offset the decline in LNG exports (-21.3% YoY; Nov: -35.9% YoY). Palm oil exports surged due to higher export volume (+12.0% YoY; Nov: +2.9% YoY) and average unit value (AUV) (+8.0% YoY; Nov: -5.4% YoY), while petroleum exports were driven by higher export volume (+35.3% YoY; Nov: - 4.3% YoY).

Manufactured exports also rebounded (+1.5% YoY; Nov: -1.4% YoY) due to slight pickup in machinery exports (+7.0% YoY; Nov: +6.0% YoY) and steady growth in optical exports (+11.9% YoY; Nov: +11.9% YoY) that offset the decline in other manufactured goods.

Imports marginally rebounded (+0.9% YoY; Nov: -3.6% YoY), driven by faster pickup in intermediate (+6.0% YoY; Nov: +1.8% YoY) and consumption goods (+3.2% YoY; Nov: +1.9% YoY), offsetting the sharper decline in capital goods (-10.9% YoY; Nov: - 4.3% YoY).

Exports growth in 4Q19 weakened (-3.3% YoY; 3Q19: -1.9% YoY). Imports also declined, albeit at a slower pace (-4.0% YoY; 3Q19: -5.8% YoY), resulting in a marginal expansion in trade surplus during the quarter (RM36.5bn; 4Q18: RM36.3bn).

HLIB’s VIEW

While there are some signs of cooling US-China trade tensions following the signing of phase one deal, we remain cautious and opine that downside risks will continue to persist. Increasing concerns on the spread of 2019-nCov have brought new downside risks to global investment and trade activity. On this note, we maintain our forecast for GDP to moderate to +4.4% YoY in 2020 (2019e: +4.5% YoY).

Source: Hong Leong Investment Bank Research - 5 Feb 2020