Data Highlight

• Malaysia's total trade declined by 2.4% YoY to RM231.79bn in November 2023. This contraction was slightly lower than the 2.5% YoY decline observed in the previous month. On a monthly basis, it contracted by 3.1%, compared to a 6.7% increase in the previous month, suggesting shaky demand in the second month of the final quarter of this year. 

• Meanwhile, Malaysia's trade surplus for the month narrowed to RM12.41bn. This figure represents a slight decrease of 3.8% from the previous month's surplus of RM12.90bn. On a YoY basis, trade surplus decreased by 43.1% from RM21.76bn in November 2022.

• Breakdown showed total exports was weaker than expected, declining by 5.9% YoY during the month (consensus: -5.2% YoY). The absolute value of Malaysia's exports amounted to RM122.10bn, reflecting a decrease of 3.2% (or reduction of RM4bn) from the previous month's RM126.09bn (Oct 2023: 1.4% MoM). Meanwhile, Malaysia's domestic exports witnessed a decline of 7.3% YoY to RM95.90bn (-0.4% MoM), while re-exports were barely unchanged at -0.04% YoY (RM26.2bn) (-12% MoM).
  
  - Among the top ten destination countries, most recorded a contraction in demand with the exception of the South Korea, Vietnam and Australia.
  
  - Exports to China, valued at RM17.21bn and contributed 14.1% to Malaysia's total exports (making it the second-largest market), declined by 8.4% YoY (October 2023: 7.0% YoY). This was due to the decline exports of palm oil & palm-based agriculture products (-40.6% YoY) and E&E products (-13.0% YoY).
  
  - Similarly, exports to Singapore was RM18.3bn, represented 15.0% to total exports, dropped by 17.0% YoY. It was due to the lower exports of E&E products (-38.5% YoY).
  
  - By sector, both manufacturing and agriculture contracted by 6.7% and 5.5% YoY to RM102.38bn and RM8.39bn, respectively. Nonetheless, the mining sector rebounded by 0.5% YoY to RM10.46bn during the month.

• A contrast performance was observed in Malaysia's total imports, with an increase of 1.7% YoY to RM109.69bn, better than October’s -0.3% YoY (consensus estimates: -0.6% YoY). On a monthly basis, total imports decreased by 3.1% from RM113.19bn in October 2023.
  
  - China remained as Malaysia's top source of imports, recording total imports of RM23.73bn, which accounted for a 21.6% share of Malaysia's imports. Nonetheless, imports from China declined by 2.4% YoY. This was impelled by the downward trend in imports of E&E products (-10.0% YoY), petroleum products (-32.7% YoY) and chemicals & chemicals products (-9.1% YoY).
  
  - Singapore followed as the second-largest source of imports with RM13.3bn (12.1% share) and increased by 22.6% YoY. This was reflected by higher imports of E&E products (+46.3% YoY), chemicals & chemicals products (+50.6% YoY) and machinery, equipment & parts (+45.8% YoY).
  
  - Looking at specific sectors, imports of manufactured and mining goods rose by 2.2%, and 3.8% YoY to RM92.23bn and RM10.40bn, respectively. Meanwhile, imports of agriculture segment declined by 1.9% YoY to RM5.69bn 

• In the first eleven months of 2023 (11M23), Malaysia's total exports and imports decreased by 7.8% YoY to RM1.31tn and RM1.11tn, respectively. Consequently, the trade balance for the 11M23 stood at RM202.49bn, indicating a YoY decline of 11.3%. The total trade during this period amounted to RM2.41tn, representing a decrease of 7.5% YoY. 

• While the trade for the current year is confirmed to register a contraction, with exports projected to decline by 7.6% and imports by 8.4%, we foresee a gradual recovery in external trade during the upcoming year. Our optimism is rooted in the anticipated resurgence of China's economy, potentially spurred by forthcoming cuts in interest rates and increased fiscal stimulus. The implementation of the National Industrial Master Plan (NIMP), with a strategic focus on high-growth and high-value sectors is poised to contribute significantly to the revival of exports. 

• Furthermore, the positive outlook extends to the global semiconductor market, as indicated by the World Semiconductor Trade Statistics (WSTS) Global Semiconductor Sales forecast for the next year, showing a noteworthy rebound of 13.1%. This contrasts sharply with the expected -9.4% decline projected for the current year. This promising trajectory underscores the pivotal role of technological advancements in driving international trade, emphasizing the critical connection between innovation and economic recovery. 

• However, there are potential factors that could dampen the trade outlook. A significant slowdown in advanced economies and the escalation of geopolitical and trade tensions pose inherent risks to the stability of global trade flow. These uncertainties emphasize the necessity for implementing justifications in trade policies. For now, we maintaining our exports and imports to register a nominal growth of 4.8% and 4.7% respectively in 2024.

Source: TA Research - 20 Dec 2023