Overview

? Exports moderate more than expected. Exports expanded 14.8% (Aug: 21.6%). The moderation in exports was significantly sharper than anticipated as per Bloomberg’s median consensus estimates calling for a 20.0% growth (Kenanga: 13.3%).

? E&E growth eases; commodity growth weakens. Slower export growth was largely attributed to weaknesses in commodity export growth (both mining and agriculture) while E&E growth was further dialled down a notch to 17.7% (Aug: 20.1%).

? Import growth also slower; weaker intermediate imports. Import growth expanded by a slower 15.2% (Aug: 22.6%). The moderation was likewise underestimated in Bloomberg’s median consensus figures which anticipated only a slight moderation to 20.0% growth instead (Kenanga: 21.2%).

? Trade surplus narrows somewhat. The trade surplus narrowed somewhat to RM8.5b (Aug: RM9.9b). However, overall, trade growth remains at double-digit levels at 15.0%, albeit slower than August’s 22.0%.

? External demand possibly hitting a peak. While both exports and imports sustained double-digit growth, slower growth suggests that the external demand boom may be approaching a peak. We believe that this lends credibility to our view of export growth for a 21.6% for 2017 (subject to fluctuations) and project a possible tapering of its doubledigit growth by 1Q18, or possibly earlier.

Exports continue to moderate. Exports sustained a double-digit growth albeit slower at 14.8% YoY (Aug: 21.6%). With the exception of a one-off dip in export growth during June (9.9%), export growth has retained double-digit growth since December 2016. However, September’s numbers extends the growth moderation to the second consecutive month from 30.9% in July. The moderation in export growth was also more prominent than the Bloomberg’s median consensus estimates calling for a 20.0% growth in exports (ranging from 12.6-25.0%) though it was somewhat close to the house forecast of 13.3% growth. On a MoM basis, exports fell 4.9% (Aug: +4.7%). Post-seasonal adjustments, exports deteriorated by a sharper 6.2% (Aug: -1.6%).

Sharply lower expansion of commodities exports. Moderating exports came about as growth in commodities-related export petered out somewhat, especially in the petroleum and gas sector. Exports of crude petroleum contracted 4.9% YoY after plateauing during August while exports of refined petroleum product saw a more modest growth of 13.2% (Aug: 35.5%), likely from a deterioration in export volume. The exports of liquefied natural gas, previously a major driver of export growth during Jun-Aug, saw significantly slower growth of 8.2% (Aug: 101.8%). Moving on to agriculture-based commodities, exports of palm oil and palm oil based product provided meagre, indeed net negative, support to export growth. Exports in the palm oil segment declined 1.6% (Aug: -1.5%).

E&E growth eases but remains key export growth driver. The electrical and electronic goods (E&E) segment maintained its double-digit growth rate of 17.7% YoY (Aug: 20.1%). Continued E&E growth was sustained by exports in electronic integrated circuits and Piezo electric crystals and parts. However, E&E growth were dragged down by exports of telecommunication equipment, parts and accessories. This led to the E&E contributing a lower 6.8 percentage points (ppts) to headline export growth (Aug: +7.7 ppts). Its share of total exports rose to 39.4%, highest since Oct 2010. It fell 0.6% MoM in September after a strong 11.2% jump in August, coinciding with seasonal factors in exports.

Imports easing. Import growth moderated to 15.2% from 22.6% in August. This was significantly lower than Bloomberg’s median consensus figures which anticipated only a slight moderation to 20.0% growth instead (ranging from 14.0-22.9%) and against the house forecast of 21.2% growth. On a MoM basis, imports contracted by 3.7% (Aug: +2.4%), similar to its seasonally adjusted figures of -4.0% (Aug: +5.1%).

Slowdown in import growth resulting from slower intermediate imports. With import growth traditionally led by intermediate goods, lower import growth largely stemmed from intermediate goods imports growing by a sharply lower 13.7% YoY (Aug: +25.3%). This came as intermediate imports for parts and accessories of capital growth and to a lesser extent, intermediate processed food and beverages import, decelerated. Elsewhere, capital imports grew at a slightly slower rate of 10.4% (Aug: 11.6%) while growth in import of consumption goods were sharply lower at 5.6% (Aug: 17.9%).

Trade growth slows; surplus narrows. With MoM exports slowing at a sharper pace than imports, the trade surplus narrowed somewhat to RM8.5b (Aug: RM9.9b). However, total trade growth remains at double-digit levels at 15.0%, albeit slower than August’s 22.0%.

Ringgit sees mild strength in September. The ringgit remained mixed against currencies of its major trading partners. The ringgit saw some appreciation against the US Dollar at USDMYR4.209 (Aug: USDMYR4.284) and the Euro at EURMYR5.014 (Aug: EURMYR5.061). However, it was also lower against the Pound and Canadian Dollar. Closer to home, the ringgit appreciated somewhat against a broad basket of currencies including the Aussie Dollar, the Singaporean Dollar, the Thai Baht, the Indian Rupee, the Hong Kong Dollar and Japanese Yen.

Source: Kenanga Research - 6 Nov 2017