Trade Surplus Narrowed to RM1.6bn in August, Lowest Since Oct 2014 

Malaysia’s export growth declined by 0.3% yoy in August, sharply lower from 9.4% in July and market expectations of an 8% increase. The significant drop in exports was reflected almost across the board, especially demand for agriculture goods, which contracted sharply by 20.8% yoy in August (-14.5% in July). In particular, exports of palm oil and palm oil-based agriculture products fell sharply by 27% yoy in August (-22.2% in July), as both export volume and value of the products declined. This may be attributed partly to the sharp depreciation of India’s rupee, which constrained the country from buying more palm oil, as India is the world’s largest importer of edible oils. In August, Malaysia’s exports to India fell significantly by 11.3% yoy as compared to 16.3% in July.

On manufactured goods, exports slowed sharply from 12.6% yoy in July to 1.8% in August. By components, exports of electrical and electronic (E&E) goods, which account for 46.8% of total manufactured goods, slowed to 3.2% yoy in August (after rising sharply by 23.6% in July). This was due to lower demand for all its sub-components, namely parts & accessories for office machines (2.4%), telecommunication equipment, parts & accessories (-10.7%), electrical apparatus & parts (-2.3%) as well as of thermionic valves & tubes and photocells (11.9%).

Lower demand for Malaysia’s E&E-related products in August was also in tandem with the slowdown in global semiconductor sales, which continued to trend lower from 17.4% yoy in July to 14.9% in August. According to the Semiconductor Industry Association (SIA), the slowdown was reflected in lower contributions from major economies, such as the US (15%), China (27.3%), Europe (9.6%) and Japan (8.3%). Likewise, other manufactured goods that contributed to lower growth during the month included optical & scientific equipment (7.9%), machinery & appliances (-7.1%), manufactures of metal (- 1.8%) as well as refined petroleum products (-3.3%). In contrast, demand for chemicals and chemical products increased by 22.6% yoy in August (19.3% in July).

Source: Affin Hwang Research - 8 Oct 2018