● Export growth accelerated in August (48.2% YoY; Jul: 38.0%) to a 16-month high, beating expectations (KIBB: 35.7%; consensus: 34.3%)

- MoM (5.4%; Jul: -8.2%): rebounded to a two-month high, following a sharp contraction in the preceding month. Higher growth was largely due to low base effect recorded last year and continued recovery in the external demand which partially offset the adverse effect of rising geopolitical tensions, ongoing China’s zero-COVID policy and the RussiaUkraine crisis.

● Exports remained supported by sustained demand from key trading partners and expansion in manufacturing sector

- By destination: Broad-based expansion among key trading partners led by SG (54.5%; Jul: 57.1%), followed by JP (41.5%; Jul: 30.8%), the US (38.2%; Jul: 20.5%), EU (30.7%; Jul: 21.1%) and CN (21.3%; Jul: 9.8%).

- By sector: growth was contributed by manufacturing (47.7%; Jul: 35.4%), which expanded for the fourth straight month followed by agriculture (42.6%; Jul: 24.1%). This partially capped the sharp slowdown in mining (59.1%; Jul: 100.4%) sector. It also rebounded on MoM-basis by 6.4% (Jul: -8.0%)

● Imports surged to 67.6% in August (Jul: 41.8%), far beating expectations (KIBB: 53.8%; consensus: 48.0%). Higher growth was due to sharp expansion in retained imports (54.8%; Jul: 37.4%) and re-exports (112.5%; Jul: 55.1%). This is also indicative of sustained domestic-driven growth trend in the 3Q22.

- By category, higher import growth was attributable to an expansion in intermediate goods (56.1%; Jul: 32.1%) and consumption goods (43.1%; Jul: 33.1%) which partially offset a moderation in capital goods (23.7%; Jul: 29.1%). On a MoM basis, import rebounded (5.0%; Jul: -4.6%).

● Trade surplus expanded to RM16.9b (Jul: RM15.6b), beating expectations (KIBB: RM15.3b; consensus: RM15.1b) as MoM exports (5.4%) outpaced imports (5.0%). Overall, total trade expanded (56.7%; Jul: 39.8%) at a fastest pace since February 1998.

● 2022 exports forecast revised up to 27.0% from previous forecast of 19.1% (2021: 26.1%) as total export value likely to cross RM1.5t mark

- Despite risk of looming global recession, ongoing China's zero-COVID policy and Russia-Ukraine conflicts, Malaysian trade performance remained relatively robust with exports expanded by 30.3% year-to-date. The better performance was primarily associated with Malaysia’s export diversification, elevated commodity prices, and partly due to weak ringgit which benefited exporters. Ringgit hit a historic monthly low against USD in Aug at 4.46.

- Nevertheless, we retained our cautious outlook amid an expected global economic slowdown brought by the acceleration in global monetary policy tightening to combat elevated inflation. Therefore, we maintain our GDP growth forecast at 5.5% - 6.0% (2021: 3.1%).

Source: Kenanga Research - 21 Sept 2022