Production Disruptions in the Global Supply Chain Remain a Risk

Malaysia’s exports growth registered a strong and unexpected double-digit growth of 11.8% yoy in February (-1.5% in January), sharply higher than market expectations of a 0.3% increase. This was its highest yoy growth since October 2018, partly due to the low base effect in the corresponding period of last year. The strong increase in export growth was attributed to higher demand for manufactured and agriculture goods, which rose by 13.1% yoy and 15.8% yoy, respectively during the month.

The double-digit rise in exports of manufactured goods in February was supported by higher exports of optical and scientific equipment (+50.9%), refined petroleum products (+17%), and machinery, equipment and parts (+23%). However, exports of E&E products, which accounted for 33.7% of total exports, contracted for the seventh consecutive month by 2.7% in February (-5.4% in January), mainly due to the decline in demand for thermionic valves, tubes and photocells, which fell by 1.5%. Meanwhile, demand for parts and accessories for office machines (+55.6%), telecommunications equipment, parts and accessories (3.1%) and electrical apparatus and parts (+2.3%) improved in February. Exports of other manufactured goods increased, such as chemical and chemical products (9.6%) and manufactures of metal (13.3%) and rubber products (+16.8%).

The sharp rise in agriculture exports was led by higher demand for palm oil and palm oil-based agriculture products, especially palm oil which rose 17.1% yoy. The sustained decline in exports of mining goods was due to lower exports of crude petroleum (-11.7%) despite the rise in exports in liquefied natural gas (LNG) of 7.1% yoy.

Higher Exports to All Major Trading Partners Except EU

Malaysia’s exports to all major trading partners increased except for the EU. Exports to China rebounded strongly by 11% from a decline of 5.6% in January, mainly due to higher exports of manufactured and agriculture goods. Furthermore, exports to the US rose by 25.5% yoy from 9.5% in January, supported by a rise in exports of manufactured goods. Similarly, exports to Asean countries registered a strong growth of 14.6% yoy in February following a contraction of 3.9% in January, led by higher exports of manufactured goods. Meanwhile, exports to Japan rebounded by 3.7% following five consecutive months of contractions, supported by higher demand for manufactured good as well as palm oil and palm oil-based agriculture products. In contrast, exports to the EU declined for the sixth straight month by 4.9% yoy (-7.3% in January) due to lower exports of E&E products and manufactures of metal.

Source: Affin Hwang Research - 6 Apr 2020