Massive growth in exports – Malaysian exports in Apr’18 stood at RM84.2m, soaring +14.0 y-o-y as compared to +2.2% in Mar’18 despite contracting 0.3% on a monthly basis. The result was substantially above in-house expectation and market consensus. The strong performance was mainly supported by higher exports of main components to key countries such as Hong Kong SAR, ASEAN and China.

Imports rebounded from contraction – Imports in Apr’18 grew at +9.1% y-o-y (vs Mar’18: -9.6%) after registering contraction for two consecutive months. The result was above our in-house and market expectations of +2.0% and +3.8% respectively. The steady performance was supported higher imports growth in capital goods. Meanwhile, on a monthly basis, imports in Apr’18 grew moderately by +2.0% m-om as compared to +13.8% m-o-m in the previous month.

As such, country's trade surplus Apr’18 stood at RM13.1, increasing +49.4% y-o-y but narrowing 11% m-o-m.

Manufacturing goods boosted export performance – Manufacturing goods which account for 83.7% of total exports increased +16.8% y-o-y (vs Mar’18:+3.7%). The robust export in manufacturing goods was reinforced by higher growth in E&E products. Export of E&E products improved +21.2% y-o-y in Mar’18 as compared to +8.8% y-o-y in the previous month. Besides, export in manufacturing goods was also buoyed by higher exports performance in other components such as Chemical & chemical products (+17.8% y-o-y vs Mar’18:-24.4%) and Manufacturer of metals (+42.8% y-o-y vs Mar’18: +17.6%). Meanwhile, exports of Mining goods grew +4.2% y-o-y (vs Mar’18:+1.5%), mainly buoyed by higher export of crude petroleum (+22.7% y-o-y vs Mar’18:+18.4%) as well as Petroleum product (+16.7% y-o-y vs Mar’18:-24.6%). However, exports of agriculture goods contracted 4.8% y-o-y (vs Mar’18: -11.2%) due to lower export of natural rubber (-4.9% y-o-y vs Mar’18: -10.5%).

Better exports to main destinations - Meanwhile, exports to key countries remained strong in Apr’18, as shown below:

• Hong Kong SAR : RM6.4 billion (+113.8% y-o-y , +1.4% m-o-m)

• Thailand : RM5.1 billion (+32.4% y-o-y , +9.0% m-o-m)

• China : RM12.4 billion (+22.0% y-o-y , +18.8% m-o-m)

Capital goods supported expansion of imports – Imports in Apr’18 rebounded from a previous contraction to +9.1% y-o-y (vs Mar’18:-9.6%), mainly supported by imports in capital goods. Capital goods improved +4.7% y-o-y (vs Mar’18: -30.5%) after being spurred by higher imports of industrial transport equipment such as aircraft and parts. However, both intermediate and consumption goods dwindled - 11.9% y-o-y and -1.8% y-o-y respectively on the back of lower imports of parts and accessories of capital goods (except transport equipment) as well as semi-durables goods.

Envisage strong exports and imports in May’18 – We anticipate exports and imports to soar further in the following month in view of strong trade performance with key countries. Therefore, we reckon that export and import will grow at +9.1% and +8.6% respectively for 2018. We believe overall external trade will maintain its positive momentum, albeit at a slower pace, driven by manufacturing sector which is backed by strong global trade activities and meaningful recovery in commodity prices. However, we opine that the prevailing trader war between the US and China could derail the global trade and hence affect our export performance.

Source: JF Apex Securities Research - 6 Jun 2018