Data Highlight

• Malaysia's total trade grew moderately by 2.1% YoY to RM244.26bn in October 2024, following a 4.5% YoY increase in the previous month. This marks the slowest pace of growth since December of the prior year.

• A detailed breakdown showed that total exports rebounded during the month, with Malaysia's exports reaching an absolute value of RM128.12bn — an increase of 1.6% compared to RM126.15bn in October 2023. This uptick was partially attributed to the diminishing high base effect, as the decline in total exports eased significantly in October 2023, registering a contraction of -4.4% YoY compared to a sharper decline of -13.8% YoY in the previous month. Consensus had projected a growth rate of 2.5% YoY.

• Malaysia's domestic exports experienced a moderate increase of 3.1% YoY to RM99.4bn, although this reflected a slight decline of 0.5% MoM. Meanwhile, re-exports saw a modest YoY decline of 3.5%, amounting to RM28.7bn, though they surged by 21.5% on a MoM basis. Overall, total exports rose by 4.9% compared to September's RM123.56bn.
   
  • Among the top ten destination countries, performance was generally positive, with only four countries experiencing a YoY contraction. In addition, the growth recorded for the US and Singapore has been offset by the contraction witnessed for China. To note these three countries contributed about 42% of total exports in October.
     
  • The US dominated the main destination country with a value of RM18.93bn and contributed 14.8% to Malaysia's total exports, an increase of 32.5% YoY. The exceptional performance was spearheaded by the higher exports of electrical & electronic (E&E) products (42.4% YoY), other manufactures (61.3% YoY), rubber products (46.6% YoY) and palm oil & palm-based products (258.2% YoY).
     
  • Singapore contributed 14.7% to total exports and amounted to RM18.86bn. Exports to Singapore rebounded to 5.6%, propelled by E&E products (23.3% YoY), iron and steel products (83.3% YoY), and machinery, equipment and parts (13.1% YoY).
     
  • Meanwhile, the value of exports to China, which constituted 12.5% of total exports worth RM16.05bn, decreased by 6.5% YoY. The decrease was due to to reduced exports of E&E products. Amid the contraction, strong exports were recorded for machinery, equipment and parts, rubber products as well as optical and scientific equipment.
     
  • A negative export performance was also recorded for three countries: Hong Kong, Japan, and Vietnam. In contrast, strong export growth was observed for Taiwan, Indonesia, and the EU in October 2024 compared to the same period in the previous year. (See Figure 6 for more details.)
     
  • Looking at specific sectors, exports of manufactured goods remained significant to the total exports with a contribution of 85.4% with an increase of 1.9% YoY to RM109.46bn. The increase was supported by higher exports of E&E products (7.6% YoY), Machinery, Equipment & Parts (10.7% YoY), Optical & Scientific Equipment (3.8% YoY) and Palm Oil-Based Manufactured Products (18.2% YoY). Exports of agriculture goods (7.6% of total exports) rose 8.9% to RM9.72bn, the seventh successive month of annual growth due to strong exports for palm oil and palm oil-based agriculture products following increased export volumes and prices. Meanwhile, exports of mining goods (6.0% share) decreased by 12.1% YoY to RM7.73bn owing to slower exports of crude petroleum resulted from reduced export volumes and prices. Nevertheless, exports of liquefied natural gas (LNG) recorded expansion led by higher export volumes and prices.
     
• Malaysia's total imports showed improved performance than exports, though there was a notable moderation, with imports increasing by 2.6% YoY to RM116.14bn, compared to a stronger 10.9% YoY growth recorded in August (consensus estimates had projected an increase of 4.0% YoY). On a monthly basis, total imports rose by 4.8% from RM110.79bn in the previous month.
   
  • China remained as Malaysia's top source of imports, recording total imports of RM24.94bn, which accounted for a 21.5% share of Malaysia's imports. Imports from China declined by 1.0% YoY. The decrease was influenced by a contraction in petroleum products (-82.1% YoY) and chemical & chemical products (-20.3% YoY).
     
  • Imports from Singapore were worth RM13.4bn, accounting for 11.6% of Malaysia's total imports, fell by 3.0% YoY. The decrease was following the lower imports in petroleum products (-24.8% YoY) and chemical & chemical products (- 6.2% YoY).
     
  • The annual change in imports from all major countries of origin recorded a decrease except for the US, Taiwan, EU and Republic of Korea.
     
  • Imports of manufacturing (2.6% YoY; RM97.56bn) and agriculture (16.7% YoY; RM6.78bn) sectors registered a growth while mining (-2.0% YoY; RM10.22bn) contracted during the month.
     
  • Imports by end use recorded an increase for two major categories. Imports of intermediate goods rose by 12.3% YoY, followed by an increase in consumption goods of 3.0% YoY. On the other hand, imports of capital goods declined by 2.7% YoY.
     
• During the month, trade surplus for the month narrowed to RM11.98bn, marking a decrease of 6.2% MoM from the previous month's surplus of RM12.77bn. On a YoY basis, the contraction of trade surplus eased significantly to -7.6% YoY from -47.7% previously.

Our Views

• Total exports for the first ten months of this year (10M24) increased by 4.8% YoY (9M24: 5.2% YoY), reaching RM1,242.88bn. At the same time, total imports rose by 14.6% YoY to RM1,140.11bn, albeit moderated from 9M24’s 16.1% YoY. This trend resulted in a trade surplus of RM102.77bn. Additionally, the total trade for the period amounted to RM2,382.99bn, marking an annual increase of 9.3%.

• Despite the deteriorating trend with China, we believe that diversification and focus on other markets will help in mitigating this impact. The US continues to experience growth and has emerged as the largest export market for Malaysia. Additionally, Malaysia consistently registers trade surpluses with other countries such as the US, Singapore and Hong Kong, with surpluses of RM8.02bn, RM5.44 and RM6.0bn, respectively, in October. Moreover, Malaysia has seen a notable increase in the import of intermediate goods from December 2023 to October 2024. This trend suggests that exports may rise soon, as intermediate goods are crucial for manufacturing final products. The increase in these imports indicates that Malaysian manufacturers are ramping up production to meet higher demand for finished goods both domestically and internationally.

• Malaysia’s export sector must stay vigilant and responsive to potential shifts driven by a Trump presidency. Trade policies enacted by the US, including tariffs and protectionist measures, could significantly disrupt global trade flows. This poses risks for Malaysia's export-oriented industries, especially those deeply embedded in global supply chains such as electronics, automotive, palm oil, and machinery. If global demand for Malaysia’s key exports declines, companies may experience reduced orders and production slowdowns. From our observations spanning 2010-2023, a 1% decline in exports to China, the U.S., and ASEAN correlates with an estimated reduction in Malaysia's overall exports by 0.9%, 0.7%, and 0.8%, respectively. Conversely, an increase in exports to these trading partners shows a similarly significant impact, underscoring the sensitivity and interdependence of Malaysia's export performance on these key markets.

• However, Malaysia’s export sector also has opportunities to gain from shifts in global trade dynamics. If US-China trade tensions escalate, Malaysia could benefit from trade diversions as companies seek to relocate their supply chains away from China to ASEAN markets. This might result in higher exports of electronics, semiconductors, and machinery, with Malaysia serving as a strategic production base for multinational companies looking to avoid tariffs. Historically, during Trump's previous tenure as president from 2017 to 2019 (pre-COVID), Malaysia's exports trajectory reflected a better reading, with average growth recorded at 8.5%, compared to a lower growth rate of 3.1% from 2013 to 2016.

• The government’s role in this process will be crucial. Efforts to enhance Malaysia’s competitiveness, such as investments in technology and automation, trade agreements, diversification of export markets, and incentives for industries to move up the value chain, could better position the country in the face of external trade shocks. A focus on bilateral trade partnerships, improved logistics, and streamlined regulatory processes can also enhance export resilience and adaptability to changing global dynamics.

• Ultimately, while a Trump presidency might present challenges, Malaysia’s export sector, with the right strategies and government support, can adapt and potentially seize new market opportunities. The Ministry of Finance projects an export growth of 5.6% and import growth of 13.8% for 2024. Looking ahead to 2025, exports are expected to rise by 3.9%, while imports are anticipated to grow by 4.1%, with the trade surplus projected at RM130.9bn. These estimates suggest a steady, albeit slightly moderated, trade performance, reflecting the evolving global economic landscape.

Source: TA Research - 20 Nov 2024