● Exports moderated to 29.2% YoY in December (Nov: 32.4%), but higher than expected (consensus: 24.4%; KIBB: 19.4%). Overall, 2021 export’s growth settled at 26.0%, highest since 1998 and beating house forecast of 16.7%, indicating a solid expansion amid uncertainty over the path of the pandemic

- MoM (10.4%; Nov: -1.9%): rebounded sharply to a three-month high despite the spread of Omicron variant among major trading partners, and a severe flood in Peninsular that mainly hit the Klang Valley.

- 4Q21 (29.0%; 3Q21: 15.8%): growth accelerated, highest since 2Q21 thanks to the resumption of economic activities on the back of relaxation in COVID-19 restriction.

● Exports relatively slowed partly due to the high base effect recorded last year but supported by higher shipment to regional trading partners

- By destination: slightly lower shipment to the US (33.4%; Nov: 33.6%), and EU (29.2%; Nov: 32.4%) partly associated with the impact of Omicron variant and high base effect recorded last year. Nonetheless, growth was supported by higher shipment to regional trading partners led by CN (28.8%; Nov: 20.5%), followed by SG (21.8%; Nov:19.7%) and TW (51.2%; Nov: 16.1%). In terms of export share, CN remained as the top export destination in 2021 with 15.5% (2020: 16.2%) share albeit shrinking followed by SG (14.0%; 2020: 14.4%) and the US (11.5%; 2020: 11.1%).

- By sector: supported by the fourth month of an expansion in manufacturing (28.4%; Nov: 28.2%) sector. However, growth was capped due to a slowdown in mining (37.0%; Nov: 45.2%) and agriculture (32.5%; Nov: 76.8%) sectors, with the latter largely associated with the impact of the monsoon season.

● Imports moderated to 23.6% (Nov: 37.9%), lower than expectations (consensus: 27.0%; KIBB: 26.0%) due to slowdown in retained imports (24.0%; Nov: 41.9%) but remained supported by re-exports (22.3%; Nov: 23.9%)

- Broad-based moderation led by intermediate goods (27.1%; Nov: 47.3%), followed by capital goods (21.0%; Nov: 32.1%) and consumption goods (13.1%; Nov: 22.8%). The slowdown was led by lower imports of parts and accessories of capital goods except for transport equipment (25.9% YoY; Nov: 73.0%) and processed industrial supplies (26.1%; Nov: 32.7%). On a MoM basis, growth fell marginally (-0.4%; Nov: 5.8%).

● Trade surplus jumped to RM31.0b (Nov: RM18.9), a record high and beating expectations (KIBB: RM19.8b; consensus: RM22.3b), as MoM exports (10.4%) sharply outpaced a slowdown in imports (-0.4%). Meanwhile, total trade moderated to 26.8% YoY (Nov: 34.9%) on a high base effect, but reaching RM216.7b, a record high in value term.

● 2022 exports growth is expected to moderate to 6.9% (2021: 26.0%) as trade activity normalise and partly due to the high base effect recorded last year

- While export performance charted a solid expansion in 2021 despite uncertainties over the COVID-19 pandemic, we are projecting a growth moderation for 2022 as the low base effect dissipates amid cooling pent up consumer demand. The slower growth projection also reflects the expected ongoing supply chain disruptions largely in the 1H22 and potential surge in COVID-19 cases amid the spread of the new variant of concern.

Source: Kenanga Research - 31 Jan 2022