• Malaysia’s export growth rose by 4.3% yoy in November (0.2% in October), led by higher overseas demand for E&E products
• The monthly trade surplus narrowed to RM16.8bn in November compared to RM22.1bn in October. On a cumulative basis, in the first eleven months of 2020, trade surplus rose by RM163.8bn (RM133.1bn in Jan-Nov 2019).
• Gross export growth declined by 2.6% yoy in Jan-Nov 2020 (-0.8% in 2019), with gross imports contracting by 7.0% in Jan-Nov 2020 (-3.5% in 2019).

Export growth led by demand for manufactured and agriculture products

Growth in Malaysia’s exports rose by 4.3% yoy in November and remained in positive territory for the third consecutive months (0.2% in October). This was supported by higher overseas demand for manufactured and agriculture products. Exports of manufactured goods rose by 8.1% yoy in November, higher than 2.5% in October. Exports of agriculture goods rose by 6% yoy in November, albeit smaller expansion than 28.7% in October. However, exports of mining goods remained weak and contracted by 34.6% yoy in November from -47.2% in October.

During the month, higher exports of manufactured goods were due to sustained demand for rubber products (+124.8%), wood products (+3.1%) optical and scientific equipment (+0.6%) as well as electrical and electronic products (E&E), which rose by 23.6%, led by higher demand for telecommunications equipment, parts and accessories (23.1%). However, exports of petroleum products declined by 28.1% yoy in November. Exports of other manufactured goods, such as manufactures of metal, chemical and chemical products and iron and steel products also contracted in November.

Exports of agriculture goods were supported by an increase in demand for palm oil and palm oil-based products, which expanded by 12.1% yoy in November. In contrast, the decline in exports of mining goods was due to contraction in exports of liquefied natural gas (-43.6%), crude petroleum (-36.5%) and petroleum condensates and other petroleum oil (-83.7%).

Exports to the US, China, EU and Japan posted positive growth in November

Exports to China rose for the eight straight month at 13.2% yoy in November (4.9% in October), supported by higher demand for iron and steel products, E&E products, other manufactures, as well as manufactures of metal and palm oil and palm-oil based agriculture products. Similarly, exports to the US rose for the sixth consecutive month by 24.6% yoy in November (25.6% in October), reflecting higher exports of E&E products, wood products, and rubber products. Exports to the EU expanded for the third consecutive month by 7.1% in November (4.7% in October), led by an increase in agriculture exports, such as rubber products. Exports to Japan turned around from -6% yoy in October to 3.5% in November, after registering four consecutive months of contraction. This was due to higher exports of E&E products, crude petroleum, palm oil and rubber products.

In contrast, exports to ASEAN countries declined by 2.2% yoy in November (-3.6% in October), due to lower exports of petroleum products as well as iron and steel products.

Gross imports declined across the board, led by weak imports of capital goods

Gross imports contracted for the ninth consecutive month by 9% yoy in November from -6% in October, weighed down by imports of intermediate goods, consumption goods and capital goods. Imports of intermediate goods, which are used as an indicator of export performance going forward, declined by 10.6% yoy in November (-6.1% in October) due to lower imports of parts and accessories (such as electrical machinery). Similarly, imports of capital goods declined sharply by 26.5% yoy in November (-14.9% in October).

Imports of consumption goods contracted by 7.2% yoy in November, falling into negative territory for the first time after rising for five straight months (3.1% in October), due to lower imports of non-durables. During the month, the trade surplus narrowed to RM16.8bn in November compared to RM22.1bn in October. On a cumulative basis, in the first eleven months of 2020, the country’s trade surplus rose and amounted to RM163.8bn (RM133.1bn in Jan-Nov 2019).

For the first eleven months of the year, exports growth declined by 2.6% yoy (-1.2% in Jan-Nov 2019), with growth in imports declining sharply by 7.0% yoy (-4.0% in Jan-Nov 2019). In the months ahead, we anticipate export growth to continue to show positive growth supported by improving external demand, especially from sustained overseas demand from China. In addition, the expected improvement in Malaysia’s other main trading partners such as the US, EU and Japan also bodes well for the country’s trade performance.

According to the Semiconductor Industry Association (SIA), global sales of semiconductors have increased for the eighth consecutive month, rising 6.0% yoy in October to US$39bn (US$37.9n in September), reflecting strong sales and demand despite ongoing uncertainties surrounding the pandemic. The World Semiconductor Trade Statistics (WSTS) projected global semiconductor sales to expand by 8.4% yoy in 2021 or US$469.4bn from an estimated growth of 5.1% or US$433.1bn in 2020. This will underpin the country’s exports of E&E products. Going into 2021, we believe Malaysia’s real exports of goods and services will recover at a growth rate of 7.2%, compared with real imports of goods and services of 7.6% for next year.

Higher economic growth of 6.0% projected for 2021, after a decline of -5%

We are maintaining our full-year growth forecast of a contraction of -5.0% yoy in 2020, lower than the Treasury’s official projection of -4.5% (+4.3% in 2019). For full-year 2021, we expect real GDP growth to turn around and expand by 6.0%, but lower than the official forecast of between 6.5% and 7.5%. Uncertainty surrounding the development of the pandemic will continue to be a downside risk to the growth outlook, especially with the resurgence of Covid-19 cases in some main trading partners such as the US and EU countries.

Source: Affin Hwang Research - 29 Dec 2020