Moderate growths for Exports and Imports – Malaysian exports in Nov’18 eased to +1.6% y-o-y after posting a double digit growth of +17.7% y-o-y in Oct’18 while contracting 12% m-o-m from +16.1% m-om in the prior month. The result was substantially below our in-house forecast as well as market consensus of +6.6% y-o-y and +6.0% y-o-y respectively. The discouraging exports growth in Nov’18 was mainly due to moderate exports growth in Manufacturing and Mining sectors as well as contraction in exports growth for Agriculture sector. Imports wise, it also soothed to +5.0% y-o-y from +11.4% y-o-y in the prior month due to contraction in imports growth in Intermediate and Capital goods amid softening growth in Consumption goods. Import’s figure also way below our in-house and market projection. On monthly basis, imports tumbled to -3.5% m-o-m from +18.1% m-o-m in the previous month. As such, the nation's trade surplus depleted to RM7.6b (from RM16.3b in Oct’18) which tumbled -24 y-o-y and -53.8% m-o-m.

Soothing exports in all sub-sectors – Manufacturing goods which accounted for 83% of total exports grew slowly to +2.2% y-o-y in Nov’18 as compared to strong growth of +19.9% y-o-y in Oct’18. The moderate expansion in Nov’18 was dented by contraction in E&E products: -1.7% y-o-y (vs Oct’18: +23.3% y-o-y), and Machinery, Appliances & Parts: -0.4% y-o-y (vs Oct’18: +4.1% y-o-y) and Manufacture of Metals: -3.5% y-o-y (vs Oct’18: +29% y-o-y). Meanwhile, Chemicals & chemical products eased to +15.1% y-o-y (vs Oct’18: +36.5% y-o-y). Besides, exports in Mining goods expanded to +16.1% y-o-y from +29.6% y-o-y last month. Exports in Mining substantially dropped due to slower exports of Petroleum product (+2.0% y-o-y vs Oct’18:+22.1% y-o-y) and Crude petroleum (-3.1% y-o-y vs Oct’18:+62.9% y-oy). However, exports in LNG rose to +15.1% y-o-y as compared to +6.4% y-o-y in Oct’18. Agriculture

wise, it remained in the negative territory for the past few months, widening its loss to -17.6% y-o-y in Nov’18 from -12.3% y-o-y in Oct’18. The subdued growth in Agriculture goods was due to lower exports in palm oil products: -21.1% y-o-y (vs Oct’18: -17.3% y-o-y) and Rubber product: -2.7% y-o-y (vs Oct’18: +14.2% y-o-y).

Slower Exports and Imports to key trading partners – For this month, Exports and Imports to key countries such as China, Singapore, USA and Japan were moderate. Exports to Singapore grew +7.1% y-oy (vs Oct’18 +18.3% y-o-y), China grew +3.9% y-o-y (vs Oct’18 +18.3% y-o-y) while USA and Japan contracted -3.65% y-o-y and -8.9% y-o-y respectively (vs Oct’18: USA: +7.7% y-o-y; Japan: +10.1% y-oy). Meanwhile, imports from China, USA and Japan contracted to -3.3% y-o-y, -5.8% y-o-y and -0.9% y-oy respectively (vs Oct’18: China: +7.6% y-o-y; USA: +4.7% y-o-y; Japan: -2.2% y-o-y). Still, imports from Singapore rose +3.9% (vs Oct’18: +9% y-o-y).

Imports growth bogged down by contraction in Intermediate and Capital goods – Imports growth in Nov’18 soothed to 5.0% y-o-y from +11.4% y-o-y in Oct’18 due to contractions in intermediate and capital goods. Intermediate goods which constituted 52.1% of total imports turned negative to -0.3 yo-y from +1.0% y-o-y last month following slowing imports of electrical machinery, equipment and parts. Consumption goods, however, still posted a positive growth albeit at a slower growth of +0.9% y-o-y (vs Oct’18: +7.6% y-o-y). Besides, capital goods posted a higher growth of +0.4% y-o-y (vs Oct’18: -1.6% yo-y) underpinned by higher imports of aircraft.

Softer exports and imports in 2018 – We reckon that export and import will maintain softer growths next month amid moderating growth in 4Q18 due to high base effect. We expect exports and imports to grow by +7.0% and +5.8% respectively for 2018 (vs 2017’s exports and imports of +18.8% and +19.2% respectively). We believe overall external trade will maintain its positive momentum, albeit at a slower pace, driven by manufacturing sector which is backed by resilient global trade activities and gradual recovery in commodity prices. However, we opine that the prevailing trade war between the US and China, although halted at the moment, could potentially derail the global trade and hence affecting our export performance for 2019.

Source: JF Apex Securities Research - 7 Jan 2019