● Exports growth surprisingly expanded to 25.4% YoY in March (Feb: 16.8%), beating expectations (KIBB: 8.9%; consensus: 12.5%)

- MoM (28.7%; Feb: -7.9%): growth rebounded sharply, reflecting a recovery in the trade activity and partly due to longer working month, despite surging COVID-19 cases brought by the Omicron variant.

- 1Q22 (22.2%; 4Q21: 29.0%): growth moderated as base effect dissipates.

● Higher exports due to improved shipment of key sectors and to some major trading partners

- By destination: higher shipment to SG (34.0%; Feb: 14.4%), followed by JP (30.6%; Feb: 15.8%) and the US (10.3%; Feb: 4.0%). Nonetheless, growth was capped due to weak shipment to CN (10.7%; Feb: 19.2%) largely due to its lockdown in several big cities amid surging COVID-19 cases.

- By sector: broad-based expansion, led by growth in mining (105.8%; Feb: 31.4%), followed by agriculture (41.8%; Feb: 38.1%) and manufacturing (19.1%; Feb: 14.2%).

● Imports accelerated to 29.9% (Feb: 18.3%), beating expectations (KIBB: 16.9%; consensus: 15.7%) due to higher re-exports (38.0%; Feb: 11.7%) and retained imports (27.6%; Feb: 20.3%)

- By category, it was a broad-based improvement led by intermediate goods (34.9%; Feb: 23.6%), followed by consumption goods (22.4%; Feb: 18.2%) and capital goods (14.3%; Feb: 4.3%). The performance was also due to a sharp increase in imports of fuel and lubricants (502.9% YoY; Feb: 38.9%).

- On a MoM basis, growth rebounded sharply (27.3%; Feb: -10.9%), the highest since March 2011.

- 1Q22 (25.2%; 4Q21: 29.6%): growth moderated as base effect dissipates.

● Trade surplus widened to RM26.7b (Feb: RM19.8b), a three-month high and beating expectations (KIBB: RM19.9b; consensus: RM22.8b) as MoM increase in exports (28.7%) exceed growth in imports (27.3%). Meanwhile, total trade accelerated to 27.3% YoY (Feb: 17.5%).

● 2022 exports growth forecast retained at 6.9% (2021: 26.0%) despite better than expected 1Q22 growth

- Despite better than expected growth in March, we believe that trade activity will continue to moderate in the coming months as the base effect dissipates and trade activity normalise. Growth would also be capped by the RussiaUkraine crisis, COVID-19 development, and China's zero-Covid policy, subsequently impacting the global supply chain and demand. Nonetheless, the adverse effect is expected to be limited given Malaysia's export diversification and robust demand from key trading partners. Therefore, we maintain 1Q22 GDP growth at 5.7% (4Q21: 3.6%), bringing the overall 2022 growth at 5.0% - 5.5% (2021: 3.1%).

Source: Kenanga Research - 20 Apr 2022