Exports growth continued its upward trajectory (Jun: +38.8% YoY; May: +30.4% YoY), far exceeding the consensus estimate of +21.2% YoY. Growth was underpinned by E&E, petroleum products and LNG exports. Meanwhile, imports also accelerated (+49.3% YoY; May: +37.3% YoY) following higher capital, intermediate, and consumption imports. The trade surplus widened to RM21.9bn (May: RM12.7bn).

DATA HIGHLIGHTS

Exports growth continued its upwards trajectory (Jun: +38.8% YoY; May: +30.4% YoY), far exceeding the consensus estimate of +21.2% YoY. Imports also accelerated to +49.3% YoY (May: +37.3% YoY). On a monthly basis, exports rebounded sharply by +21.3% (May: -5.6%), while imports grew +15.2% (May: +3.5%). Consequently, the trade surplus widened to RM21.9bn (May: RM12.7bn).

In terms of major export markets, stronger exports growth was recorded to Japan (+55.8% YoY; May: +14.8% YoY), ASEAN (+55.2% YoY; May: +44.2% YoY), EU (+39.4% YoY; May: +30.1% YoY) and US (+30.6% YoY; May: +15.4% YoY), mainly owing to higher exports of E&E products. Meanwhile, exports to China continued to moderate (+4.2% YoY; May: +10.0% YoY).

Manufactured exports (+34.5% YoY; May: +30.0% YoY) accelerated during the month, contributing +25.3ppt to overall growth (May: +22.2ppt). Machinery, equipment & parts (+35.0% YoY; May: +20.9% YoY), optical & scientific equipment (+24.6% YoY; May: +11.7% YoY), and manufacture of metals (+20.6% YoY; May: +1.9% YoY) posted higher growth, which offset the slight moderation in E&E products (+40.9% YoY; May: +45.5% YoY) and slower chemical exports (+4.1% YoY; May: +17.2% YoY).

Commodity-related exports also accelerated (+50.6% YoY; May: +31.7% YoY), resulting in a larger contribution of +13.5ppt (May: +8.2ppt) to exports growth. This was mainly driven by a surge in petroleum products exports (+104.1% YoY; May: +81.2% YoY). LNG (+153.1% YoY; May: +60.6% YoY) also accelerated, following a rebound in export volume (+53.2% YoY; May: -6.1% YoY) and robust average unit value (AUV) (+65.2% YoY; May: +71.2% YoY). Similarly, crude petroleum exports strengthened (+82.2% YoY; May: +52.8% YoY) following positive export volume (+5.2 YoY; May: -17.9% YoY) and AUV growth (+73.1% YoY; May: +86.2% YoY). These offset the slight moderation in palm oil exports (+51.7% YoY; May: +54.0% YoY) and steeper decline in rubber products (-63.4% YoY; May: -62.9% YoY).

Imports growth (+49.3% YoY; May: +37.3% YoY) strengthened across the board; capital (+30.4% YoY; May: -1.8% YoY), intermediate (+46.9% YoY; May: +34.4% YoY), and consumption imports (+25.6% YoY; May: +19.0% YoY). Higher capital imports were mainly due to industrial transport equipment, while intermediate imports were driven by processed industrial supplies. Consumption imports mainly rose on the back of processed food and beverages.

HLIB’s VIEW

The prolonged geopolitical tensions and high inflationary environment continues to cloud the global trade outlook. Nevertheless, Malaysia is still expected to maintain its positive export momentum given its diversified export structure and support from elevated global commodity prices. We maintain our expectation for BNM to raise OPR by another 25bps in Sep, bringing OPR to 2.5% by end-2022.

Source: Hong Leong Investment Bank Research - 21 Jul 2022