Exports growth accelerated to +30.5% YoY in May (Apr: +20.8% YoY), surpassing the consensus estimate of +30.3% YoY. Growth was mostly contributed by E&E, petroleum and palm oil products. Imports growth also strengthened (+37.3% YoY; Apr: +22.1% YoY) on higher inte rmediate and consumption imports, which offset the decline in capital imports. The trade surplus narrowed to RM12.6bn (Apr: RM23.5bn).

DATA HIGHLIGHTS

Exports growth accelerated to +30.5% YoY in May (Apr: +20.8% YoY), surpassing the consensus estimate of +30.3% YoY. Imports also accelerated to +37.3% YoY (Apr: +22.1% YoY). On a monthly basis, exports shrank (-5.6%; Apr: -3.0%), while imports grew (+3.6%; Apr: -0.8%), resulting in a narrower trade surplus of RM12.6bn (Apr: RM23.5bn).

In terms of major exports market, stronger exports growth was recorded to ASEAN (+44.2% YoY; Apr: +14.2% YoY) on the back of strong E&E and petroleum products demand. Meanwhile, exports to EU (+30.2% YoY; Apr: +31.1% YoY), US (+15.5% YoY; Apr: +18.0% YoY), Japan (+14.0% YoY; Apr: +24.3% YoY) and China (+10.1% YoY; Apr: +12.4% YoY) softened.

Both manufactured exports and commodity-related exports trended higher during the month. Manufactured exports grew +30.1% YoY (Apr: +28.3% YoY), contributing +22.4ppt to growth (Apr: +20.8ppt). This was led by higher E&E products (+45.3% YoY; Apr: +27.5% YoY) and machinery, equipment & parts (+21.4% YoY; Apr: +15.8% YoY), which offset the moderation in chemicals (+17.2% YoY; Apr: +33.1% YoY), optical & scientific equipment (+11.5% YoY; Apr: +15.7% YoY) and manufacture of metals (+1.3% YoY; Apr: +52.6% YoY).

Commodity-related exports accelerated to +31.7% YoY (Apr: +0.1% YoY), contributing +8.2ppt (Apr: +0.03ppt) to overall growth. This was mainly driven by a surge in petroleum products (+81.2% YoY; Apr: -4.0% YoY). Palm oil exports also accelerated (+53.9% YoY; Apr: +35.0% YoY), supported by higher export volume (+20.9% YoY; Apr: -0.9% YoY) and continued rise in average unit value (+28.6% YoY; Apr: +47.4% YoY). These offset the moderation in LNG (+60.6% YoY; Apr: +60.9% YoY) and crude petroleum exports (+52.8% YoY; Apr: +64.5% YoY) owing to a decline in export volumes. Rubber exports declined further (-62.9% YoY; Apr: -59.5% YoY), likely due to waning demand for rubber gloves.

Imports growth also strengthened (+37.3% YoY; Apr: +22.1% YoY) following higher intermediate (+34.1% YoY; Apr: +28.4% YoY) and consumption imports (+19.3% YoY; Apr: +9.9% YoY), which offset the decline in capital imports (-0.8% YoY; Apr: -2.4% YoY). Intermediate imports were driven by fuel and lubricants, industrial supplies, and parts and accessories of capital goods (except transport equipment), while consumption imports were supported by processed food and beverages as well as non-durables, mainly for pharmaceutical products.

HLIB’s VIEW

The optics for trade remain favourable for Malaysia given its diversified export structure. As the economy fully reopens, export volumes are also expected to rise alongside support from high commodity prices. Nevertheless, there continue to be risks from ongoing geopolitical tensions and elevated inflation. We maintain our expectation for BNM to increase OPR by 50bps in 2H22.

Source: Hong Leong Investment Bank Research - 20 Jun 2022