? Exports moderate but retain double-digit growth. Exports retained a strong growth of 21.5% (Jul: 30.9%), moderating significantly from July. Notwithstanding slower exports relative to July, export growth outperformed consensus estimates calling for a 20.0% growth but was just under the house forecast of a 23.6% growth.

? E&E growth eases somewhat. With E&E remaining a key ingredient of exports, E&E exports were likewise lower, easing to 20.1% (Jul: 28.4%). This came as several E&E export components saw growth easing a touch. August’s commodity export numbers provided a lower support to growth largely from falling palm oil exports.

? Import growth advances further. Import growth was higher at 22.6% (Jul: 21.8%), beating consensus estimates of 20.9%. While imports continued to be driven by intermediate goods, it was also broad-based with consumption and capital imports likewise seeing growth.

? Trade surplus widens again. The trade surplus widened to RM9.9b (Jul: RM8.0b) on the back on bigger expansion in monthly exports while total trade continued to expand albeit slower by 22.0% (Jul: 26.4%).

? Approaching a peak for external trade? While it may be too early to attribute slower exports to a long-term trend given that July’s export growth may be an anomaly, we are seeing signs from other similar indicators that external demand may have eased somewhat from its peak and may fall below double digit levels by 1Q18. However, we retain our full-year export growth estimate at 21.6%.

Exports moderate but remain elevated. After a strong start to the quarter (3Q17), exports clocked a more modest growth of 21.5% (Jul: 30.9%). This was close to Bloomberg’s median consensus estimates calling for 20.0% growth (ranging from 17.3-26.4%) and was likewise close to the house forecast of 23.6%. Barring a one-off dip in export growth during June (Jun: 9.9%), exports growth were at double-digit levels since December 2015. On a MoM basis, exports grew by a solid 4.6% (Jul: 7.6%) largely from positive seasonal factors; removing these seasonal components, exports declined by 1.7% instead (Jul: +8.7%).

E&E growth easing but still strong. The electrical and electronic goods (E&E) segment grew by a more subdued 20.1% (Jul: +28.4%) suggesting waning support from the E&E segment. We are seeing some weaknesses among exports of some E&E goods. These weaknesses were most evident with the deterioration of exports for electrical apparatus and parts and worsening decline of exports for parts and accessories and machines. Nevertheless, as a whole, the E&E sector remains a crucial ingredient of Malaysia’s export growth, contributing 7.7 percentage points (ppts) to headline export growth given the resilience of exports for integrated circuits, and telecommunication parts and accessories.

Source: Kenanga Research - 9 Oct 2017