Exports growth eased but remained robust nonetheless at +38.0% YoY in Jul (Jun: +38.7% YoY), slightly missing consensus estimate of +39.0% YoY. Despite support from manufactured exports, growth was slightly lower following softer export volumes in commodity-related exports. Meanwhile, imports moderated to +41.9% YoY (Jun: +49.2% YoY) amid slower intermediate and capital imports. The trade surplus narrowed to RM15.5bn (Jun: RM21.9bn).

DATA HIGHLIGHTS

Exports growth eased but remained robust nonetheless at +38.0% YoY in Jul (Jun: +38.7% YoY), slightly missing consensus estimate of +39.0% YoY. Imports also moderated to +41.9% YoY (Jun: +49.2% YoY). On a monthly basis, both exports and imports declined, with the pace of decline of exports (-8.2%; Jun: +21.2%) outpacing that of imports (-4.5%; Jun: +15.2%), resulting in a narrower trade surplus of RM15.5bn (Jun: RM21.9bn).

In terms of major export markets, stronger exports growth was recorded to ASEAN (+55.6% YoY; Jun: +55.2% YoY) and China (+9.8% YoY; Jun: +4.2% YoY), on the back of strong E&E and petroleum products demand. Meanwhile, exports to US (+20.5% YoY; Jun: +30.4% YoY), Japan (+30.8% YoY; Jun: +55.7% YoY) and EU (+21.2% YoY; Jun: +38.9% YoY) moderated.

Commodity-related exports slowed during the month, offsetting the acceleration in manufactured exports. Manufactured exports grew +35.9% YoY (Jun: +34.3% YoY), resulting in a larger contribution of +26.1ppt to overall growth (Jun: +25.2ppt). This was led by a pickup across machinery, equipment & parts (+56.9% YoY; Jun: +33.8% YoY), optical & scientific equipment (+36.3% YoY; Jun: +25.7% YoY), manufacture of metals (+35.7% YoY; Jun: +21.5% YoY) and chemical exports (+19.1% YoY; Jun: +4.1% YoY), which offset the slight moderation in E&E products (+35.2% YoY; Jun: +40.9% YoY).

Commodity-related exports moderated (+43.7% YoY; Jun: +50.6% YoY), resulting in a smaller contribution of +11.9ppt (Jun: 13.5ppt) to exports growth. A slowdown was seen for most products; LNG (+82.0% YoY; Jun: +153.1% YoY), crude petroleum (+74.0% YoY; Jun: +83.1% YoY), petroleum products (+80.3% YoY; +104.1% YoY) and palm oil exports (+26.2% YoY; Jun: +51.7% YoY), following softer export volumes despite the still robust average unit values. Meanwhile, rubber products exports continued to decline (-52.1% YoY; Jun: -63.4% YoY), albeit at a slower pace.

Meanwhile, imports growth moderated (+41.9% YoY; Jun: +49.2% YoY) following softer growth for capital (+29.6% YoY; Jun: +29.9% YoY) and intermediate imports (+32.2% YoY; Jun: +46.8% YoY), offsetting the acceleration in consumption imports (+33.2%; Jun: +25.8% YoY). Consumption imports were mainly supported by imports of processed food & beverages mainly for household consumption.

HLIB’s VIEW

Malaysia’s trade performance is expected to remain resilient benefitting from its diversified export structure and continued growth in manufacturing sector. However, rising uncertainties on the global landscape, including tighter monetary conditions and a potential slowdown in global activities could taper the country’s positive trade momentum. 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 - 22 Aug 2022