Exports and imports trend lower – Malaysian exports in Nov’17 stood at RM83.5b, registering a +14.4% y-o-y growth as compared to +18.9% y-o-y in the previous month. The result was slightly below our in-house expectation of +15.0% and market consensus of +14.5%. The lower result was dented by slower exports in main components such as Palm oil & Palm oil-based agriculture products as well as Crude Petroleum products. Meanwhile, imports in Nov’17 stood at RM73.6b, increasing +15.2% y-o-y (vs Oct’17: +20.9%). The higher import was above our in-house expectation and market consensus. The higher than expected performance of imports in Nov’17 was reinforced by higher imports in capital goods. As for monthly basis, both export and import registered growths of +1.3% m-o-m and 2.4% m-o-m respectively.

As such, the country's trade surplus in Nov’17 stood at RM9.95b, expanding +9.2% y-o-y but narrowing 5.8% m-o-m.

Adverse growth in Palm oil products and Crude petroleum products – Palm oil & Palm oil-based agriculture products as well as Crude petroleum products in Nov’17 decreased by 5.2% y-o-y and 3.1% respectively as compared to growths of +22.1% and +7.9% in last month. This has led to lower in export in agriculture goods by 2.5% y-o-y to RM6.73b.

Besides that, exports to key countries also moderated in November;

• China : (Nov’17: RM11.3 billion) vs (Oct’17: RM11.5 billion)

• Singapore : (Nov’17: RM12.2 billion) vs (Oct’17: RM11.3 billion)

• USA : (Nov’17: RM7.6 billion) vs (Oct’17: RM8.0 billion)

• Hong Kong SAR : (Nov’17: RM5.1 billion) vs (Oct’17: RM5.2 billion)

However, export of E&E products remained robust amid slower export growth in this month. E&E products, which contributed 8% of total export, increased +21.0 y-o-y (vs Oct’17: +16.9%) and rose +18% on a monthly basis. This was in line with Semiconductor Industry Association (SIA) which saw global semiconductor sales growing +21.5% y-o-y in Nov’17 and climbed +1.6% m-o-m as all major regional markets posted increases in November, led by America.

Slip in consumption goods lead to lower import growth – Imports in Nov’17 eased to +15.2% y-o-y (vs Oct’17:+20.9%) mainly due to lower growth in consumption goods. Consumption goods with 8.9% contribution to total import grew +6.6% y-o-y (vs Oct’17: +11.2%). While import components such as intermediate goods and capital goods posted a moderate growth of +13.8% y-o-y (vs Oct’17:+14.8%) and +12.2% y-o-y (Oct’17:+5.1%) respectively. The firm growth in intermediate goods and capital goods was buoyed by higher imports in articles of chopper and parts of machinery & mechanical appliances.

Envisage softened growth in export and import – We reckon that export and import growths will continue to soften in the 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 - 8 Jan 2018