● Exports rose sharply to a 13-month high (38.8% YoY; May: 30.4%), far beating expectations (KIBB: 23.2%; consensus: 21.2%)

- MoM (21.3%; May: -5.6%): rebounded sharply to a three-month high, on signs of improving global demand amid dissipating impact of COVID-19 pandemic and despite of uncertainty brought by China’s zero-COVID policy and the Russia-Ukraine crisis.

- 2Q22: YoY growth surged to a four-quarter high (30.0%; 1Q22: 22.0%), driven by the reopening of economic and social activities as many nations transitioned to the state of endemicity.

● Higher exports due to higher shipment of all key sectors to key trading partners

- By destination: higher shipment to key trading partners led by SG (71.6%; May: 40.9%), followed by JP (55.8%; May: 14.8%), EU (39.4%; May: 30.1%) and US (30.6%; May: 15.4%). However, growth momentum was capped by a lower shipment to CN (4.2%; May: 10.0%).

- By sector: growth across the sector broadly expanded, led by YoY growth acceleration in mining (116.3%; May: 54.6%), followed by agriculture (46.8%; May: 43.9%) and manufacturing (33.8%; May: 27.4%).

● Imports surged to 49.3% in June (May: 37.3%), beating expectations (KIBB: 37.1%; consensus 32.0%). This is the highest import growth since February 1998, with the performance largely due to sharp expansion in retained imports (41.7%; May: 28.6%) and sustained re-exports (72.2%; May: 78.3%)

- By category, import growth was bolstered by a broad based expansion led by intermediate goods (46.9%; May: 34.4%), followed by capital goods (30.4%; May: -1.8%) and consumption goods (25.6%; May: 19.0%).

- On a MoM basis, growth expanded sharply (15.2%; May: 3.5%) attributable to higher import of capital goods.

● Trade surplus expanded sharply to RM21.9b (May: RM12.7b), beating expectations (KIBB: RM15.9b; consensus: RM17.1b) as exports rebounded sharply on MoM (21.3%) far exceeded imports (15.2%). Likewise, total trade expanded sharply to 43.4% YoY (May: 33.6%), a 13-month high.

● 2022 exports forecast revised up to 19.1% from the previous 6.9% (2021: 26.0%) due to solid external demand

- Exports expanded by 30.0% YoY in 2Q22 (1Q21: 22.0%), with a year-to-date expansion of 26.1% over the last six months. The solid performance reflects that exports remain resilient despite the ongoing Russia-Ukraine crisis and China’s zero-COVID policy. This was mainly attributable to Malaysia’s export diversification led by a solid E&E sector and elevated commodity prices, which bodes well for the country. Besides, we believe the surge in trade performance was also contributed by the weak Ringgit and partly due to improvement in the global supply chain as China gradually reopened their economic activities.

- Despite solid exports, we see trade surplus relatively narrowing amid rising imports driven by strong consumption and investment activities. Likewise, our growth is still susceptible to downside risks, and we maintain 2Q22 GDP growth at 7.7% (1Q22: 5.0%), supporting the overall 2022 GDP growth forecast at 5.0% - 5.5% (2021: 3.1%).

Source: Kenanga Research - 21 Jul 2022