• In February 2024, Malaysia's total trade experienced a YoY increase of 3.3% to RM211.8bn. However, this growth was significantly lower than the 13.3% YoY increase seen in the previous month, and it decreased by 9.7% MoM from RM234.6bn. The weaker trade figures could be probably due to lesser working days during the Lunar New Year break, which might not accurately reflect the underlying trade momentum.

• Meanwhile, Malaysia's trade surplus for the month widened slightly to RM10.87bn. This figure represents a slight increase of 6.9% from the previous month's surplus of RM10.17bn. On a YoY basis, trade surplus decreased significantly by 44.4%.

• Breakdown showed total exports was weaker than expected, declining by 0.8% YoY during the month (consensus: +2.0% YoY). The absolute value of Malaysia's exports amounted to RM111.33bn, reflecting a decrease of 7.9% (or reduction of RM11.1bn) from the previous month's RM122.41bn. Particularly, Malaysia's domestic exports witnessed an increase of 4.7% YoY to RM91.51bn (-3.4% MoM), while re-exports were dropped by 20.2% YoY to RM19.82bn (-28.5% MoM). The shorter working days and festive season, may impact monthly performance, as historically, February, typically amidst festivities, has often recorded a contraction.
   
  • Among the top ten destination countries, performance varied, with five countries experiencing a decline.
     
  • Singapore sustained as the primary contributor to Malaysia's exports during the month. Together with China, both countries accounted for a substantial 26.9% of Malaysia's total exports, solidifying their positions as key destination countries for Malaysian exports. In addition, the percentage share of US also increased from the previous month at 12.2% (Jan24: 11.0% of total exports).
     
  • Singapore recorded a value of RM15.7bn and down 15.3% YoY. The decrease was attributable from lower exports of electrical & electronic (E&E) products (-24.8% YoY) and petroleum products (-27.9% YoY).
     
  • Exports to China reduced marginally by 0.4% to RM14.3bn on account of lower exports of E&E products. Despite the decline, export expansion was recorded for LNG, paper and pulp products as well as manufactures of metal.
     
  • On the contrary, exports to the US posted a double-digit expansion of 10.1% to RM13.58bn, aided by strong exports of E&E products, machinery, equipment and parts as well as optical and scientific equipment.
     
  • Looking at specific sectors, exports of manufactured and agriculture goods decreased by 2.4%, and 4.8% YoY to RM93.09bn and RM6.81bn, respectively. Meanwhile, exports of mining goods increased by 9.1% YoY to RM10.74bn

• A contrast performance was observed in Malaysia's total imports, with an increase of 8.4% YoY to RM100.46bn, lower than January’s +18.7% YoY (consensus estimates: +7.2% YoY). On a monthly basis, total imports decreased by 11.2% from RM112.24bn in the previous month.
   
  • China remained as Malaysia's top source of imports, recording total imports of RM25.7bn, which accounted for a 19.4% share of Malaysia's imports. Imports from China rose marginally by 0.1% YoY. The rise in imports from China was driven by an increase in machinery, equipment & parts (40.5% YoY), followed by manufacture of metal (33.7% YoY) and iron & steel products (56.2% YoY).
     
  • Imports from Singapore was worth RM12.5bn, accounting for 12.4% of Malaysia's imports, an increase of 29.5% YoY. The increase was driven by E&E products (42.7% YoY), petroleum products (20.4% YoY) and machinery, equipment & parts (65.4% YoY).
     
  • In addition, Imports of capital goods rose by 30.3% YoY to RM10.24bn, followed by a 19.7% YoY increase in consumption goods (RM8.43bn) and 14.3% YoY in intermediate goods (RM55.78bn).
     
  • Looking at specific sectors, imports of all segment, namely, manufacturing (RM84.85bn) and agriculture (RM5.66bn) segments rose by 11% and 8.1% YoY, respectively, while mining sector decreased by 11.3% YoY RM8.23bn.

Our View

• Total exports have increased by 3.9% YoY to RM233.74bn in the first two months of this year (4Q23: -6.9% YoY), while total imports have risen by 13.9% YoY to RM212.7bn YTD24 (4Q23: 1.3% YoY), leading to a cumulative trade surplus of RM21.05bn. In the meantime, the total trade during the period has reached RM446.43bn, increasing by 8.3% annually compared to 4Q23’s -3.2% YoY. The positive YTD trade print bolsters some hope for a resilient 1Q24 GDP growth (TA forecast: 4.3% YoY).

• We expect trade to see an improvement throughout the year, driven by increasing demand from international markets, the projected recovery of China's economy, and a promising outlook for the global semiconductor market. Our current forecast maintains a 4.8% growth for exports and a 4.7% growth for imports in 2024.

• Moreover, there are positive indicators for global trade recovery in 2024. The World Trade Organization (WTO) projects a 3.3% growth in merchandise trade, paralleled by the International Monetary Fund's (IMF) forecast of a similar expansion. The IMF also anticipates a 3.1% increase in global GDP. These optimistic projections are fuelled by enhanced growth prospects in the world's leading economies, notably the US and China, which are Malaysia's primary trading partners. This upward trajectory in the global economy is further bolstered by increased private and public spending, heightened labour force participation, improved supply chain resilience, and favourable trends in energy and commodity prices.

• However, we acknowledge the presence of several potential risks that could impact this outlook. These include escalating geopolitical tensions, reduced demand from key trading partners, and prolonged sluggishness in global production activities.

• All eyes will be on the latest 2023 Bank Negara Annual report on 20 March, together with all macroeconomic indicators’ projection including real GDP and trade figures.

Source: TA Research - 19 Mar 2024