Data Highlights

• Malaysia's total trade experienced a YoY increase of 12.1% in April 2024, amounting to RM221.74bn. This growth was higher than the 5.1% YoY increase seen in the previous month but declined by 9.3% from March 2024's RM244.41bn.

• Meanwhile, Malaysia's trade surplus for the month narrowed to RM7.70bn. This figure represents a decline of 39.4% from the previous month's surplus of RM12.72bn. Moreover, on a YoY basis, the contraction in trade surplus eased to 39% from RM12.63bn in April last year, as compared with 52.3% YoY drop previously.

• Total exports rose significantly during the month, with Malaysia's exports reaching RM114.72bn. This reflects a notable increase of 9.1% (or RM9.5bn) from April 2023's RM105.19bn. However, consensus expectations were for a growth of 14.1% YoY. Specifically, Malaysia's domestic exports saw an increase of 14.5% YoY to RM91.81bn, despite a MoM decline of 11.8%. In contrast, re-exports fell by 8.3% YoY to RM22.91bn, with a MoM decrease of 6.3%. The low base effect significantly influenced April’s performance, as exports had declined sharply by 17.5% YoY in April 2023. On a MoM basis, total exports declined by 6.6% from March’s RM128.56bn.
   
  • Among the top ten destination countries, performance varied, with 8 countries experiencing a growth on a YoY basis.
     
  • Singapore, China and the US sustained as the primary contributor to Malaysia's exports during the month. Together, the three countries accounted for a substantial 39.7% of Malaysia's total exports, solidifying their positions as key destination countries for Malaysian exports.
     
  • Exports to Singapore rose by 9.0% YoY to RM18.23bn. This growth was mainly supported by higher exports of electrical & electronic (E&E) products (9.8% YoY), machinery, equipment & parts (55.2% YoY) and iron & steel products (81.2% YoY).
     
  • Meanwhile, exports to China as the second highest destination country in April 2024, amounted to RM14.1bn and accounted for 12.3% of Malaysia's total exports, up 2.1% YoY, a better performance as it rebounded after eight consecutive months of decline. This increase was driven by higher exports of paper & pulp products (85.2% YoY); chemical & chemicals products (24.3% YoY); manufacture of metal (22.7%) and machinery, equipment & parts (51.4% YoY).
     
  • Shipments to the US accelerated by double-digit growth of 17.3% YoY to RM13.2bn on account of higher exports of optical and scientific equipment, machinery, equipment and parts as well as iron and steel products.
     
  • Exports to European Union (11.3% YoY to RM8.97bn), Hong Kong (9.0% to RM7.47bn), Vietnam (15.8% YoY to RM4.16bn), Taiwan (62% YoY to RM4.98bn) and Thailand (13.6% to RM4.83bn) also registered an uptrend during the month.
     
  • On the contrary, exports to Japan shrank by 4.3% to RM5.75bn following slower exports of E&E products, crude petroleum as well as chemicals and chemical products.
     
  • Looking at specific sectors, exports of manufactured goods which constituted 84.8% of total exports registered the second consecutive month of YoY expansion, rising 7.1% to RM97.32bn. Exports of mining goods (7.2% share) posted the third consecutive month of YoY growth in April 2024 with a double-digit expansion of 27.5% to RM8.22bn and exports of agriculture goods (7.2% share) in April 2024 rebounded by 13.8% YoY to RM8.2bn after two consecutive months of contraction.
     
• A better performance (growth) was observed in Malaysia's total imports, with a significant increase of 15.6% YoY to RM107.02bn, higher than February 12.5% YoY (consensus estimates: 17.8% YoY). On a monthly basis, total imports decreased by 2.5% from RM115.85bn in the previous month.
   
  • China remained as Malaysia's top source of imports, recording total imports of RM24.68n, which accounted for a 23.1% share of Malaysia's imports. Imports from China rose by 22% YoY. This growth was boosted by E&E products which increased by 22.3% YoY, machinery, equipment & parts (45.0% YoY) and iron & steel products (51.0% YoY).
     
  • Imports from Singapore were worth RM13.9bn, comprising 13.0% of Malaysia's imports, up 35.5% YoY. This growth was mainly contributed by higher imports of E&E products (32.2% YoY) and petroleum products (30.5% YoY).
     
  • Of the ten countries, imports from nine major countries of origin recorded high value changes as compared to the previous year except for the Republic of Korea (-10.3% YoY), which recorded a decrease.
     
  • Looking at specific sectors, imports of all segment, namely, manufacturing (12.2% YoY; RM86.49bn), agriculture (8.7% YoY; RM1.69bn) and mining (43.5% YoY; RM7.41bn) goods registered growth during the month.

Our Views and Thoughts

• Total exports in the first four month of this year have seen an uptick, marking a 3.8% YoY increase to RM477.05bn (1Q24: 2.2% YoY). Concurrently, total imports have surged by 13.7% YoY to RM435.22bn, showing a continued momentum from the 1Q24's 13.1% YoY growth. This dynamic has resulted in a trade surplus of RM41.83bn. Moreover, the overall trade value for the period has reached RM912.27bn, indicating a promising annual increase of 8.3% compared to the first quarter's increase of 7.1% YoY.

• For this year, we anticipate improvement in trade performance, buoyed by growing demand from international markets, the anticipated recovery of China's economy, and a promising outlook for the global semiconductor market. Particularly, China’s official manufacturing purchasing managers’ index (PMI) remained in expansion territory for a second straight month in April, although the growth slowed slightly compared to March, underlying subindices pointing to persisting supply-demand imbalances and lingering deflationary pressures. The gauge – a survey of sentiment among factory owners – stood at 50.4 in April, slightly down from 50.8 in March. Meanwhile, the Caixin/S&P Global manufacturing PMI showed a similar upbeat sentiment, rising to 51.4 from 51.1 in March. The PMI is a key economic indicator that reflects the health of a country's manufacturing sector. A PMI above 50 indicates expansion, while a reading below 50 suggests contraction. As such, when China’s PMI increases, it signals that the manufacturing sector in China is growing, which can have positive implications on Malaysia.

• An increase in China's PMI suggests that Chinese factories are ramping up production. This expansion typically leads to a surplus of goods available for export. As Chinese factories demand more raw materials and components, this might stimulate economic activity in countries that supply these inputs, including Malaysia. Moreover, Malaysian businesses, seeing a strong manufacturing outlook in China, might be more inclined to invest in expanding their own capacities, further increasing the volume of imports from China.

• We project a growth of 4.8% and 4.7% in Malaysia’s exports and imports, respectively in 2024. We will make necessary adjustments as we continue to monitor the prolonged escalation in tensions between China and the US/Europe and China's economic progress.

Source: TA Research - 21 May 2024