Feb’s trade performance rebounded, boosted by low base effect. Exports bounced back by +11.8% YoY (Jan: -1.5% YoY), exceeding the consensus estimate of +0.3% YoY. Imports also rebounded by +11.3% YoY (Jan: -2.4% YoY). Exports were mainly driven by commodity-related products as well as chemicals, machinery, optical and metal products. Imports were bolstered by intermediate and consumption imports. The trade surplus rose to RM12.6bn (Jan: RM12.0bn).

DATA HIGHLIGHTS

Exports rebounded by +11.8% YoY in Feb (Jan: -1.5% YoY), beating market expectations of +0.3% YoY, while imports grew by +11.3% YoY (Jan: -2.4% YoY). Meanwhile, on a monthly basis, exports and imports declined further by -11.5% (Jan: - 2.6%) and -14.2% (Jan: -2.4%) respectively. Trade surplus rose to RM12.6bn (Jan: RM12.0bn).

Exports to most major markets improved, except to the EU which fell further by - 12.7% YoY (Jan: -7.4% YoY) on account of lower exports of E&E and manufactures of metal. Exports to Japan (+3.7% YoY; Jan: -1.6% YoY), China (+11.0% YoY; Jan: - 5.7% YoY) and ASEAN (+14.6% YoY; Jan: -4.1% YoY) recovered, while exports to US accelerated (+25.5% YoY; Jan: +9.5% YoY). This was driven by increase in E&E, wood, optical and machinery exports.

Commodity-related exports accelerated to +11.0% YoY (Jan: +5.2% YoY), mainly bolstered by higher palm oil products (+14.7% YoY; Jan: +0.5% YoY) and LNG exports (+7.1% YoY; Jan: -22.8% YoY). Palm oil exports were driven by higher average unit value (+24.4% YoY; Jan: +20.3% YoY) while LNG was driven by rebound in export volume (+24.2% YoY; Jan: -12.2% YoY).

Manufactured exports posted a strong recovery (+12.0% YoY; Jan: -3.3% YoY) owing to higher exports of chemicals (+9.6% YoY; Jan: -17.7% YoY), machinery (+23.0% YoY; Jan: +5.7% YoY), optical (+50.9% YoY; Jan: -0.1% YoY) and metal (+13.3% YoY; Jan: -2.7% YoY), offsetting the continued decline in E&E exports (-2.7% YoY; Jan: -5.4% YoY).

Meanwhile, imports rebounded on the back of intermediate (+20.4% YoY; Jan: +3.7% YoY) and consumption imports (+10.1% YoY; Jan: -1.0% YoY) which offset the steeper decline in capital imports (-16.9% YoY; Jan: -14.9% YoY). Intermediate imports were driven by parts of electrical machinery and equipment, while consumption imports rose on account of processed food and beverages for household consumption.

HLIB’s VIEW

Global manufacturing PMI rose slightly to 47.6 in March (Feb: 47.1). This was almost entirely due to a stabilisation of China PMI (50.1, from 40.3 in Feb). The Global excluding China PMI reading was 46.6 in March, its lowest level since May 2009 amid further decline in output, new orders and employment. Following this, Malaysia’s export performance is expected to weaken in the coming months as global demand is expected to deteriorate further. Prolonged decline in capital imports alongside weak business sentiment also suggests weaker investments during the year. We maintain our 2020 GDP forecast at -2.0% YoY (2019: +4.3% YoY), with weaker growth expected to extend into 2Q20.

Source: Hong Leong Investment Bank Research - 6 Apr 2020