Following the resumption of economic activities amid strong external demand, exports growth strengthened to +24.7% YoY in Sep (Aug: +18.4% YoY), beating the consensus estimate of +14.0% YoY. Exports of petroleum products, palm oil products and metals contributed the most to growth. Meanwhile, imports also accelerated to +26.5% YoY (Aug: +12.5% YoY), backed by higher intermediate and consumption imports. The trade surplus widened to RM26.1bn (Aug: RM21.4bn).

DATA HIGHLIGHTS

Stronger exports momentum was recorded in Sep (+24.7% YoY; Aug: +18.4% YoY), exceeding the consensus estimate of +14.0% YoY. Imports also accelerated to +26.5% YoY (Aug: +12.5% YoY). On a monthly basis, exports and imports rebounded by +16.0% (Aug: -1.8%) and +14.2% (Aug: -11.2%) respectively. Consequently, trade surplus widened to RM26.1bn (Aug: RM21.4bn).

In terms of markets, exports surged to ASEAN (+31.4% YoY; Aug: +25.1% YoY) owing to higher petroleum product and E&E exports. Growth also strengthened to US (+19.2% YoY; Aug: +12.1% YoY) and China (+19.0% YoY; Aug: +5.7% YoY), driven by manufactures of metal. Meanwhile, growth moderated to Japan (+18.3% YoY; Aug: +40.8% YoY) and EU (+3.0% YoY; +6.4% YoY).

Commodity-related exports gained momentum (+54.7% YoY; Aug: +35.7% YoY), contributing +10.1ppt to growth (Aug: +7.4ppt). Growth was led by acceleration in petroleum product exports (+148.0% YoY; Aug: +56.5% YoY), LNG (+73.0% YoY; Aug: +110.2% YoY) and palm oil products (+57.6% YoY; Aug: +35.1% YoY) as supply disruptions have led to the global surge in commodity prices. Crude petroleum has also rebounded (+9.1% YoY; Aug: -3.9% YoY), while rubber exports dropped (-14.3% YoY; Aug: +4.0% YoY).

Manufactured exports also increased (+17.9% YoY; Aug: +13.8% YoY), contributing +14.5ppt to overall growth (Aug: +11.0ppt). Growth was led by metals (+115.1% YoY; Aug: +69.8% YoY), possibly due to the surge in metal prices. Other exports softened; chemical products (+38.7% YoY; Aug: +59.1% YoY), machinery, equipment & parts (+21.3% YoY; Aug: +27.9% YoY) and E&E (+5.6% YoY; Aug: +6.8% YoY). The moderation in E&E exports was in line with the trend in semiconductor equipment billings (+35.5% YoY; Aug: +37.8% YoY). Meanwhile, optical & scientific equipment declined at a slower pace (-7.4% YoY; Aug: -17.7% YoY).

Imports accelerated to +26.5% YoY (Aug: +12.5% YoY), backed by higher intermediate (+29.7% YoY; Aug: +13.5% YoY) and consumption imports (+3.7% YoY; Aug: -0.7% YoY). Intermediate imports were primarily driven by electrical machinery, equipment and parts, while higher imports of processed food & beverages pushed consumption imports up. Capital imports moderated to +20.3% YoY (Aug: +22.8% YoY).

HLIB’s VIEW

Malaysia is a diversified economy, with commodities contributing 24% of total exports and manufactured goods accounting for 76%. Hence, the rise in commodity prices and strong demand for manufactured goods, especially semiconductor chips are expected to benefit Malaysia’s trade sector in the coming months. Nevertheless, should supply chain disruptions and higher energy prices become more persistent, this could negatively affect the flow of trade activity over the longer-term. We maintain our forecast for BNM to retain the OPR at 1.75% in the 3rd Nov MPC meeting.

Source: Hong Leong Investment Bank Research - 29 Oct 2021