Exports expanded by +17.6% YoY in Feb (Jan: +6.6% YoY), surpassing the consensus estimate of +7.1% YoY. Growth was mainly driven by E&E and commodity-related exports, particularly rubber products, petroleum products and palm oil. Meanwhile, imports also recorded a surge (+12.7% YoY; Jan: +1.3% YoY) owing to strong growth in capital and consumption imports. Trade surplus widened to RM17.9bn (Jan: RM16.6bn).

DATA HIGHLIGHTS

Exports expanded by +17.6% YoY in Feb (Jan: +6.6% YoY), surpassing the consensus estimate of +7.1% YoY. This was the strongest growth recorded since Oct 2018. Meanwhile, imports surged by +12.7% YoY (Jan: +1.3% YoY). On a monthly basis, the decline in imports (-4.5%; Jan: -2.7%) was steeper relative to exports (- 2.3%; Jan: -6.4%), resulting in a wider trade surplus of RM17.9bn (Jan: RM16.6bn). Exports to all major markets improved. Exports to China accelerated (+35.8% YoY; Jan: +26.0% YoY) due to low base effect as the country went into lockdown on Feb 2019. Exports to US also strengthened (+26.0% YoY; Jan: +18.4% YoY), driven by higher exports of rubber products. Other major markets, namely EU (+15.3% YoY; Jan: +11.4% YoY), ASEAN (+13.7% YoY; Jan: +7.3% YoY) and Japan (+2.4% YoY; Jan: -1.2% YoY) also recorded improvements.

Commodity-related exports strongly rebounded (+33.7% YoY; Jan: -3.9% YoY) contributed by the continued surge in rubber products (+188.7% YoY; Jan: +187.4% YoY), as well as turnaround in petroleum products (+32.1% YoY; Jan: -32.4% YoY) and palm oil (+10.7% YoY; Jan: -10.9% YoY). These offset the persistent weakness in crude petroleum (-24.3% YoY; Jan: -31.9% YoY) and LNG exports (-17.0% YoY; Jan: -40.0% YoY).

Manufactured exports also strengthened (+13.2% YoY; Jan: +9.6% YoY), with the largest contribution from E&E products (+25.5% YoY; Jan: +13.1% YoY) driven by high demand for semiconductors, followed by chemical products (+20.3% YoY; Jan: +10.6% YoY) and manufactures of metal (+27.0% YoY; Jan: +19.9% YoY). Slight decline was recorded for machinery, equipment & parts (-0.2% YoY; Jan: -1.5% YoY) and optical & scientific equipment (-0.3% YoY; Jan: +9.9% YoY).

Imports jumped +12.7% YoY (Jan: +1.3% YoY) owing to capital imports (+39.0% YoY; Jan: -5.4% YoY), which turned around after seven months of decline. This was driven by higher imports of capital goods excluding transport equipment, mainly parts of machinery and mechanical appliances. Consumption imports also surged (+17.6% YoY; Jan: +1.3% YoY) due to higher imports of durables, especially furniture. These offset the marginal decrease in intermediate imports (-0.2% YoY; Jan: +1.4% YoY).

HLIB’s VIEW

The strength of overall trade activity is anticipated to improve as global manufacturing new orders (Feb: 53.8; Jan: 54.2) and new export orders (Feb: 51.1; Jan: 50.2) continued to expand. In 2Q21, exports growth is anticipated to trend higher, partly driven by further improvement in external demand and low base effect from weak exports due to lockdown measures implemented in the same quarter last year. Nevertheless, the risk of virus resurgence remains high. While many major economies have begun their mass inoculation programmes, these economies have also recorded new spikes in positive Covid-19 cases following the reopening of economic activities, which may put some downward pressure on overall trade recovery. Maintain 2021 GDP forecast at +5.0%.

Source: Hong Leong Investment Bank Research - 30 Mar 2021