Data Highlight

• Malaysia's total trade experienced a YoY decline of 4.3% to RM225.11bn in December 2023. Although this contraction was higher than the revised 2.7% decline noted in the preceding month, the MoM contraction of 2.6% showed a slight improvement from the 3.4% MoM decrease in the previous month. 

• Meanwhile, Malaysia's trade surplus for the month narrowed to RM11.80bn. This figure represents a slight decrease of 3.6% from the previous month's surplus of RM12.23bn. On a YoY basis, trade surplus decreased significantly by 57.8% from RM28.14bn in December 2022. 

• Breakdown showed total exports was weaker than expected, declining further by 10% YoY during the month (consensus: -5.0% YoY). The absolute value of Malaysia's exports amounted to RM118.45bn, reflecting a decrease of 2.7% (or reduction of RM3.28bn) from the previous month's RM121.74bn. Meanwhile, Malaysia's domestic exports witnessed a decline of 7.4% YoY to RM97.26bn (+1.8% MoM), while re-exports dropped by 19.8% YoY to RM21.19bn (-19.1% MoM).
  
  - Among the top ten destination countries, most recorded a contraction in demand with the exception of Indonesia.
  
  - China surpassed Singapore as the primary contributor to Malaysia's exports during the month. Together, China and Singapore accounted for a substantial 28.1% of Malaysia's total exports, solidifying their positions as key destination countries for Malaysian exports.
  
  - Exports to China, which constituted 14.9% of total exports, was valued at RM17.7bn. Nonetheless, it declined by 1.5% YoY. The decrease was due to the lower exports of petroleum products (-80.4% YoY) and palm oil & palm-based agriculture products (-28.6% YoY).
  
  - At the same time, Singapore, which was the second highest country of destination with a value of RM15.6bn and contributed 13.2% to Malaysia's total exports edged down by 24.8. It was the result of lower exports of electric & electronic (E&E) products (-42.9% YoY) and petroleum products (-25.7% YoY).
  
  - Looking at specific sectors, exports of manufactured and agriculture goods decreased by 10.3%, and 25.9% YoY to RM99.01bn and RM8.17bn, respectively. Meanwhile, exports of mining segment increased by 9.1% YoY to RM10.37bn 

• A contrast performance was observed in Malaysia's total imports, with an increase of 2.8% YoY to RM106.66bn, better than November’s +1.5% YoY (consensus estimates: -4.2% YoY). On a monthly basis, total imports decreased by 2.6% from RM109.50bn in November 2023.
  
  - China remained as Malaysia's top source of imports, recording total imports of RM23.17bn, which accounted for a 21.7% share of Malaysia's imports. Nonetheless, imports from China declined by 3.5% YoY. This was impelled by the downward trend in imports of petroleum products (-68.3% YoY), chemical & chemical product (-21.3% YoY) and machinery, equipment & parts (-6.9% YoY).
  
  - Imports from Singapore worth RM11.9bn, accounting for 11.2% of Malaysia's imports, rose by 11.8% compared to the same month of the preceding year. This was reflected by the higher imports of E&E products (50.8% YoY), machinery, equipment & parts (47.0% YoY) and optical & scientific equipment (78.4% YoY).
  
  - Looking at specific sectors, imports of all segment, namely, manufacturing, agriculture and mining segments rose by 2.3%, 9.8% and 741.8% YoY to RM89.21bn, RM5.87bn and RM10.33bn, respectively. 

• In the past year, the global trade landscape exhibited a sluggish expansion, influenced by various factors such as diminished commodity prices, geopolitical uncertainties, elevated inflation rates, and a downturn in the semiconductor sector. Persistent weakness in commodity prices notably impacted trade, particularly for crude palm oil, crude petroleum, and liquefied natural gas. Further, geopolitical uncertainties arising from conflicts like the US-China tension, RussiaUkraine situation, and conflicts in the Middle East adversely affected the global economy, leading to reduced demand for Malaysian products. Additionally, the high global inflation rate eroded consumer purchasing power in importing countries, further contributing to the challenges faced in the international trade arena. 

• Due to various challenges, Malaysia's exports and imports for the year 2023 experienced a YoY decline of 8.0% and 6.4%, amounting to RM1.43tn and RM1.11tn, respectively. Consequently, the trade balance for the year decreased by 16.4% YoY, reaching RM214.10bn, while the total trade during this period stood at RM2.64tn, reflecting a 7.3% YoY decrease. 

• Despite these weak readings, Malaysia's trade performance last year surpassed the RM2tn mark for the third consecutive year, maintaining a surplus trend for 26 successive years since 1998. Exports achieved a remarkable feat by exceeding RM1tn for the third consecutive year, reaching 82.4% of the target set for 2025 under the Mid-Term Review of the Twelfth Malaysia Plan (12MP). Simultaneously, imports reached another milestone by crossing the RM1tn mark for the second time. 

• As per the advance estimates provided by DOSM, Malaysian economy is anticipated to be adversely affected by the weakened performance of trade. The current data suggests that net exports are likely to underperform, primarily due to imports outpacing exports. In the last quarter of 2023, the trade balance exhibited a significant reduction in net surplus, amounting to RM39.93bn, as opposed to RM58.91bn in the previous quarter. This represents a YoY and QoQ decline of 45.9% and 37.3%, respectively. These figures indicate a notable decrease in the trade surplus, signaling potential challenges in recording a robust economic performance. 

• Our optimism for this year is grounded in the anticipated resurgence of China's economy, potentially driven by the gradual increase in domestic demand and with more stimulus policies in the offing. Furthermore, there are indications that China is poised to achieve a growth rate surpassing 5.2% this year. This positive outlook for China's economic expansion adds another layer of optimism to the overall economic landscape, potentially contributing to broader regional and global economic growth. Additionally, the positive outlook extends to the global semiconductor market, with the World Semiconductor Trade Statistics (WSTS) Global Semiconductor Sales forecast for the year indicating a noteworthy rebound of 13.1%. This stands in stark contrast to the expected -9.4% decline projected for 2023. As of now, we maintain our forecast for exports and imports to register a nominal growth of 4.8% and 4.7%, respectively, in 2024.

Source: TA Research - 22 Jan 2024