Exports continued to post double-digit growth of +47.3% YoY in May (Apr: +63.0% YoY), but came in below the consensus estimate of +57.5% YoY. Growth continued to be mostly contributed by E&E, rubber and petroleum products. Meanwhile, imports expanded by +50.3% YoY (Apr: +24.6% YoY) on higher capital and consumption imports. Consequently, trade surplus narrowed to RM13.7bn (Apr: RM20.4bn).

DATA HIGHLIGHTS

Exports continued to post double-digit growth of +47.3% YoY in May due to low base effect (Apr: +63.0% YoY), but came in below the consensus estimate of +57.5% YoY. Imports surged by +50.3% YoY (Apr: +24.6% YoY). On a monthly basis, exports and imports fell -12.6% (Apr: +0.6%) and -7.8% (Apr: +5.5) respectively, which led to narrowing of trade surplus to RM13.7bn (Apr: RM20.4bn).

Exports to all major markets moderated, but continued to record double-digit expansion. This includes Japan (+52.6% YoY; Apr: +60.3% YoY), ASEAN (+49.4% YoY; Apr: +58.6% YoY), US (+46.5% YoY; Apr: +128.6% YoY), EU (+33.5% YoY; Apr: +85.4% YoY) and China (+17.7% YoY; Apr: +28.0% YoY). Growth across major markets were mostly driven by E&E exports.

Commodity-related exports remained robust (+82.3% YoY; Apr: +82.8% YoY), backed by sharp increase in crude petroleum (+141.0% YoY; Apr: +37.0% YoY) and LNG (+45.2% YoY; Apr: -1.3% YoY), owing to low base effect. Growth was also supported by rubber (+133.2% YoY; Apr: +207.2% YoY), petroleum products (+75.1% YoY; Apr: +87.8% YoY) and palm oil exports (+60.5% YoY; Apr: +73.0% YoY), albeit at a softer pace.

Manufactured exports eased to +38.1% YoY (Apr: +56.9% YoY), as higher growth in chemical exports (+42.5% YoY; Apr: +39.4% YoY) was offset by moderation in manufactures of metal (+81.6% YoY; Apr: +180.7% YoY), machinery, equipment & parts (+36.8% YoY; Apr: +172.4% YoY), E&E products (+34.3% YoY; Apr: +43.0% YoY) and optical & scientific equipment (+29.2% YoY; Apr: +85.6% YoY). Despite the moderation, E&E products remained the largest contributor to overall exports growth (+12.9ppt).

Meanwhile, imports surged by +50.3% YoY (Apr: +24.6% YoY) following a rebound in capital imports (+34.0% YoY; Apr: -37.7% YoY), driven primarily by machinery and mechanical appliances, as well as higher consumption imports (+37.8% YoY; Apr: +29.7% YoY) stemming from durables, particularly jewellery. Intermediate imports eased to +52.4% YoY (Apr: +64.6% YoY).

HLIB’s VIEW

On the global manufacturing sector, the faster rate of expansion of new export orders PMI (May: 54.9; Apr: 54.7) signalled trade activity remains robust as global economic recovery is underway. However, the shipping industry is still reeling from container shortages and the effects of the Suez Canal blockage back in March, which heavily affected global supply chains and skyrocketed freight rates. This could be further exacerbated by the recent disruption at Yantian Port in Shenzhen, one of the world's major container ports, due to a Covid-19 outbreak. Domestically, being a major player in the global semiconductor trade, the decreased workforce capacity for Malaysia’s E&E sector (60%) could lead to cutbacks in production and cause a ripple effect on supply chain as well.

Source: Hong Leong Investment Bank Research - 29 Jun 2021