Higher exports and imports – Malaysian exports recorded a higher growth in Oct’17, chalking up +18.9% y-o-y (vs Sept’17: +14.8%) and +5.3% m-o-m (vs Sept’17: -4.8%). The result was above our inhouse expectation and market consensus of +13.5% y-o-y and +17.3% y-o-y respectively. The upbeat performance was reinforced by higher exports in main components including Crude Petroleum products, Manufacture of metal products and Rubber products. Besides, imports in Oct’17 surged +20.9% y-o-y (vs Sept’17: +15.2%) and +3.2% m-o-m (vs Sept’17: -3.7%), underpinned by Intermediate goods and Consumption goods. The result also came above our in-house expectation and market consensus of +13.0% y-o-y and +20.0% y-o-y respectively.

As such, the country's trade surplus in Oct’17 stood at RM10.6b, expanding +6.9% y-o-y and +22.6% m-o-m. Trade surplus recorded its highest value since April 2016.

Crude petroleum products showed robust export growth – Export of crude petroleum products, which accounted for 3.5% of total exports, surged to 62.9% y-o-y (vs Sept’17: -4.8%) buoyed by the increase in both export volume (+40.2%) and average unit value (+16.2%). In addition, rubber products, which contributed 2.7% of total exports, spiked +30.6% as compared to the previous month (Sept’17: +19.4%). Besides, export of manufacture of metal products recorded growth of +38% in Oct’17 from +24.2% in last month.

Strong export to key countries – Exports to key countries were strong this month. The rise in export to main countries was mainly spurred by strong exports performance of E&E products.

• Singapore : (Oct’17: RM11.3 billion) vs (Sept’17: RM11.2 billion)

• China : (Oct’17: RM11.5 billion) vs (Sept’17: RM11.4 billion)

• USA : (Oct’17: RM8.0 billion) vs (Sept’17: RM7.7 billion)

• Japan : (Oct’17: RM5.9 billion) vs (Sept’17: RM5.8 billion)

Continued growth in export of E&E products amid robust semiconductor sales – E&E products, which contributed 37.7% of total export, increased +16.9% y-o-y (vs Sept’17: +18.0%) and rose +0.8% on a monthly basis. Meanwhile, according to Semiconductor Industry Association (SIA), global semiconductor sales were +21.9% y-o-y higher in Oct’17 and climbed +3.2% m-o-m following high demand for memory products.

Consumption goods pushed import components growth – Imports in July’17 recorded a higher growth of +20.9% y-o-y (vs Sept’17:+15.2%) mainly caused by steady growth in its main component – consumption goods (8.3% contribution to total import) which grew +11.2% y-o-y (vs Sept’17: +5.5%), while import of intermediate goods grew by +14.8% (vs Sept’17: +13.7%). However, capital goods eased to +5.1% y-o-y (vs Sept’17: +10.4%). Notably, strong growths in consumption goods and intermediate goods was buoyed by strong imports of processed food beverages and industrial supplies while soft growth in capital goods was due to moderated import in capital goods (excluding transport equipment).

Envisage softened growth in export and import – We reckon that export and import will experience a softer growth next month amid moderate growth in 4Q17 due to adverse base effect. However, we believe overall external trade will maintain its positive growth, albeit at a slower pace, driven by manufacturing sector which is backed by strong global demand and meaningful recovery in commodity prices.

Source: JF Apex Securities Research - 7 Dec 2017