Export Growth Dragged by Weak Demand for Commodity Related Products

Malaysia’s export contracted by 0.5% yoy in March albeit smaller decline after falling sharply by 5.3% in February. The contraction in May was mainly dragged by the weak exports of mining goods and agriculture goods, which fell sharply by 7.4% yoy and 10.4% yoy respectively in March. However, exports of manufactured goods posted a positive growth of 1.5% yoy in March (-4.9% in February).

The turnaround in exports of manufactured goods was supported by petroleum product (26.2%), optical and scientific equipment (19.2%), chemical and chemical products (4.1%), processed food (7.6%) and paper and pulp products (29.8%). However, exports of electrical and electronics (E&E) products, which accounted 44.1% of total manufactured exports, declined by 1.9% yoy in March (4.9% rise in February), due to contraction in exports of part and accessories for office machines, which slumped by 42.7% yoy in March. It was the highest contraction since December 2011, which posted negative growth of -43.6% yoy.

Meanwhile, the weak demand for mining goods was due to lower exports of crude petroleum, which plunged by -33.5% yoy in March, as reflected in lower volume. In contrast, exports for liquefied natural gas (LNG) rose by double-digit growth of 17.2% yoy in March, with the assistance of higher volume and Average Unit Value (AUV). At the same time, the weak export for agriculture good was due to lower exports of palm oil and palm oil-based product. It was predominantly dragged by the decline in palm oil exports, which dropped by 14.1% during the month due to lower volume and AUV.

Rebound in Exports to China and ASEAN

On the performance of exports to Malaysia’s main trading partners, exports to US and EU contracted in March, except for China and ASEAN. Malaysia’s export to China rebounded to 11.8% yoy in March (-1.6% in February), driven by increase in export of petroleum products, E&E products, chemicals and chemical products, LNG as well as metalliferous ores and metal scrap. Likewise, exports to ASEAN posted positive growth of 1.3% yoy, after falling by 7.8% in February, due to improvement in demand of LNG, transport equipment, optical and scientific equipment, iron and steel products and manufactures of metal.

However, Malaysia’s export to the US continued to decline for the second consecutive month and registered a negative growth of 3.6% yoy (-8.9% in February), dragged by lower demand of transport equipment, petroleum products, manufactures of metal and chemical and chemical products.

Meanwhile, exports to Japan recorded the fifth consecutive months of negative growth and declined by double-digit of -11.3% yoy in March, due to lower exports of LNG and crude petroleum products. Separately, exports to the EU declined by 5.0% yoy in March, after rising for two months in row, due to a decrease in demand of manufacturers of metal, E&E products, palm oil-based manufactured products, textiles, apparel, footwear and transport equipment.

Source: Affin Hwang Research - 6 May 2019