Market Insight Tuesday, 6 June, 2017 RM'bn Jan'10 Jan'11 Jan'12 Jan'13 Jan'14 Jan'15 Jan'16 Jan'17 % y-o-y Imran Nurginias Ibrahim imran@bimbsec.com.my PP16795/03/2013(031743) 03-26131733 www.bisonline.com Malaysia Economy Economics Exports and Imports slowed down in il Exports and imports grew at slower rate on yoy and plunged mom Trade surplus broaden to RM8.8bn All major sectors dropped on monthly basis Drop in shipments of major sectors triggered the slower pace of mom growth Import growth moderated in il Continued growth momentum Malaysia s exports and imports continued its strong uptrend annual growth momentum in il albeit appears to be decelerating as compared to the previous month. Export maintained its double digit growth for the fifth consecutive months and grew 20.6% (Mar: 24.1%) in il whilst import expanded 24.7% (Mar: 39.4%), its sixth consecutive months of double digit growth. The trade surplus widened to RM8.8bn in il (Mar: RM5.4bn) bringing Jan- trade surplus to RM27.6bn (Jan- 2016 RMYR33.0bn; -16.3% yoy). In a contrary, exports and imports plunged on a monthly basis. Exports sharply declined at 10.5% or dropped by RM8.7bn as compared to the preceding month. Likewise, imports slumped by 15.6% in il after posted an outstanding growth in March (22.5%). In seasonally adjusted terms, exports and imports slipped in il; -3.9% and -12.5% correspondingly. Total trade registered a slower growth of 22.5% yoy, valued at RM139.2bn in il compared to the highest value ever recorded in Malaysia posted in the previous month. On monthly basis, it dropped by RM20.7bn or -12.9% in contrast with a significant growth registered in March (18.5%). Chart 1: Malaysia: External Trade 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 Trade Balance (LHS) Exports (RHS) Imports (RHS) 50 40 30 20 10 0-10 0.0-20 Source: Department of Statistics, BIMB Securities www.bimbsec.com.my 1
Table 1: Malaysia External Trade Summary Nov 16 Dec Jan 17 Feb Mar Exports (MYR bn) 72.8 75.6 70.2 71.8 82.6 74.0 % YoY 7.8 10.7 13.6 26.6 24.1 20.6 % MoM 5.2 3.7-7.0 2.2 15.1-10.5 Imports (MYR bn) 63.8 66.8 65.5 63.1 77.2 65.2 % YoY 11.2 11.5 16.1 27.7 39.4 24.7 % MoM 7.3 4.8-2.0-3.8 22.5-15.6 Total Trade (MYR bn) 136.6 142.4 135.8 134.8 159.9 139.2 Trade Balance (MYR bn) 9.0 8.7 4.7 8.7 5.4 8.8 Source: Department of Statistics, BIMB Securities Robust exports despite decline in shipments in all sectors Export performance in il grew at a slower pace as compared to March mainly due to a moderate growth in agriculture and manufacturing sector; 21.2% yoy (Mar: 25.4%) and 17.3% yoy (Mar: 22.0%) respectively. On a flip side, mining sector growth expanded higher in il, increased by 51.8% as compared to 36.1% registered in a prior month. Export of manufactured goods grew 17.3% (Mar: 22.1%) to RM60.5bn and contributed about 81.8% to Malaysia s total export. The bulk of the total export was hold by the E&E products, constituted 35.5% of total exports, increased slightly to 22.2% yoy to RM26.2bn. In comparison with the same month of 2016, majority components of the manufacturing sector posted a declining growth in il 2017. Shipments of petroleum product posted a slower growth of 5.4% yoy as compared to significant growth in March (52.6%). Exports of mining goods expanded further in il, surged by 51.8% yoy (Mar: 36.1%) to RM6.5bn and accounted for 8.8% to Malaysia s total exports. This was attributed mainly to higher exports of liquefied natural gas (LNG) which increased by 50.2% from 11.5% in March. Crude petroleum, which contributed 3.2% to total exports, increased 65.7% to RM2.4bn. Exports of agriculture goods valued at RM6.3bn or 8.5% share of total exports grew by 21.2% yoy (Mar: 25.4%). The growth was slower as all the sub-sectors in agriculture sector registered a moderate annual growth in il except for saw log which dropped sharply -20.6% from a positive growth 3.1% in March. On a monthly basis, exports of these major sectors tumbled significantly in il; (Manufacturing: - 10.1%, mining: -15.4% and agriculture: -8.3%). Import growth moderated in il On yearly basis, the total imports in il 2017 grew by 24.7% down from the 39.4% increase recorded in the previous month. The growth was attributed to higher imports of intermediate goods, capital goods and consumption goods. Intermediate goods, valued at RM38.4bn or 58.9% share of total imports, increased by 29.2%, mainly attributed to parts and accessories of capital goods, fuel and lubricants, primary and www.bimbsec.com.my 2
industrial supplies, processed. Imports of capital goods which represented 12.3% of total imports grew RM1.0bn or 14.8% to RM8.0bn due to the increase in capital goods and transport equipment and Imports of consumption goods which accounted 8.7% of total imports recorded an increase of RM58.5m (+1.0%) to RM5.7bn. The increase was mainly attributed to food and beverages, processed and primary, mainly for household consumption and durables. However non-durables decreased RM79.3m or 5.7%. Performance of major markets Total trade with ASEAN showed an upward trend for 6th consecutive month, rising by 19.7% to RM37.4bn in il 2017. Exports to ASEAN climbed by 14.9% to RM21.1bn and contributed 28.6% of Malaysia s total exports. Growth in exports was registered to all ASEAN markets except for Vietnam, Cambodia and Laos. Exports to Singapore, Thailand, the Philippines, Indonesia and Myanmar recorded double digit growths and collectively contributed 89.2% of Malaysia s total exports to the region. Imports from ASEAN rose by 26.6% to RM16.3bn. Table 2: Exports to ASEAN Country Exports (% yoy) Exports value (RM) Singapore +15.8 10.6bn Thailand +22.1 3.9bn Indonesia +13.0 2.7bn Philippines +30.7 1.4bn Vietnam -4.6 2.0bn Laos -44.6 5.5m Cambodia -8.8 76.5m Myanmar +27.2 286.0m Brunei +3.8 189.9m Source: Department of Statistics, BIMB Securities Trade with China expanded by 28.9% to RM22.6bn compared with il 2016. In il 2017, exports amounted to RM10.2bn or 13.7% share of total exports. Exports recorded a sturdy growth of 50.6% buoyed by higher exports of petroleum products, E&E products, and LNG as well as rubber products. Exports to China continued to record the positive yoy growth since ober 2016. Imports from China increased by 15.3% to RM12.5bn. Exports to the US sustained double digit growth since the past 2 months and in il exports grew by 11% to RM7.4bn or 10% share of Malaysia s total exports. Imports expanded by 17.4% to RM5.3bn. Total trade with the US stood at RM12.6bn in il, up by 13.6% yoy. In il 2017, trade with the EU rose by 15.1% to RM12.9bn. Exports to the EU was valued at RM7.5bn, an increase of 26.5% and accounted for 10.1% share of Malaysia s total exports. Imports from the EU grew by 2.5% to RM5.4bn. Among the top 10 EU markets, exports to 7 countries registered double digit growth. Exports to the Netherlands increased by 61.1%, Germany (+23.1%), www.bimbsec.com.my 3
the United Kingdom (+11.3%), Poland (+57.2%), Hungary (+38.4%), Sweden (+27.7%) and Spain (+20%). Trade with Japan in il 2017 jumped 27.4% and was valued at RM11.5bn. Exports to Japan rose at a faster pace in il, surging by 44.7% to RM6.4bn or 8.6% share of Malaysia s total exports, following robust demand for LNG, E&E products and petroleum products. This was the highest yoy growth recorded since June 2010. Imports posted an increase of 10.8% to RM5.1bn Continued growth momentum il s figures speak of the continued growth momentum for Malaysia. Continually elevated levels of exports and, to a certain extent, total trade, implies that external demand is on the mend and may provide a better-than-expected upside to headline growth. While the external sector saw negative contribution to headline GDP growth (net exports (exports imports) reduced headline growth by 1.2ppts), we are nonetheless positive on the sharp recovery in the external demand as a catalyst for growth. That external trade is as vibrant as it is, serves as a reassurance that the global trade agenda continues to be strong with further legroom for supply-side growth. We view positively on the stronger imports growth as both capital and intermediate goods surpassed consumption, which translates into positive economic growth. Given the higher growth in capital and intermediate imports, stronger imports have been indicative of a revitalised industrial demand which may feed into brisker industrial activity. Additionally, given that the high import growth may be, in part, attributed to a weaker ringgit during late 4Q16 to 1Q17, the ringgit recovery since il may see some moderation in import figures moving forward. We believe export volume will continue to grow at a steady pace in 2017 on the back of a steady and moderate global growth. Hence, it should support the prices of commodities World Bank says trade, manufacturing to boost 2017 global growth. Global trade will defy fears of protectionism in America to grow at its fastest pace this year since 2014, according to World Bank forecasts. Having slowed for two years, global trade volumes are expected to rise 4.0% this year. The world economy is forecast to expand by 2.7%, up from 2.4% in 2016. Until 2015, global trade had been expanding more rapidly than global GDP but that trend was reversed amid a fall in Chinese growth and sluggish investment. With the election of President Trump last year and a groundswell of support for populist parties in Europe there had been fears that trade could suffer another setback. Global trade growth hit a low of 2.5% last year, just above the World Bank s estimate of 2.4% GDP growth. The trade recovery began in the second half of the year, supported by stronger industrial activity. Signs of higher levels of investment this year are expected to support the trade recovery. The World Bank warned in its June updates of Global Economic Prospects report that protectionism remained a threat but said that, so far, there was little evidence of it. The World Bank said that protectionist measures do not appear to have been a significant factor behind weak trade since the global financial crisis. The World Bank kept its outlook for the global economy unchanged, forecasting a modest pick-up in growth despite uncertainty about monetary policy and the risk of a surge in protectionism. The world economy is projected by the World Bank to grow by 2.7% this year and 2.9% the next, the same as its January forecast. Still, the lender warned that risks to its global outlook remain tilted to the downside. Policy uncertainty is likely to remain high in 2017, and there is a risk that financial-market volatility could increase from current low levels, the bank said. www.bimbsec.com.my 4
The World Bank said US growth also is improving but it shaved 0.1ppt off its forecast for 2017 to 2.1% after weak growth early in the year caused by a pullback in consumer spending it viewed as temporary. It slightly lifted its 2018 US growth forecast to 2.2%. The World Bank raised its forecast for growth in the Eurozone to 1.7% this year, up 0.2ppt from previously, as loose monetary policy supports domestic demand and strengthening global trade and investment lifts manufacturing. The bank also boosted its outlook for Japan to 1.5%, up 0.6 ppt from its forecast six months ago, as stronger external demand boosts exports and the economy benefits from accommodative monetary and fiscal policy. The bank left its forecast for growth this year in China unchanged at 6.5%. Upward trajectory in global trade remains. Malaysia s positive export trend is in line with the cyclical upturn in regional exports though the momentum showed signs of moderation in il. Latest manufacturing PMI eased with Nikkei ASEAN manufacturing PMI showed slower aggregate activity amid softer output and new orders. Philippines, Vietnam, Myanmar and Indonesia continue to record expanding manufacturing activity in May while Thailand, Singapore and Malaysia saw modest contraction. Table 3: Global Exports (%YoY) 16 Nov Dec Jan 17 Feb Mar Malaysia -8.6 7.8 10.7 13.6 26.6 24.1 20.6 Indonesia 5.1 21.5 16.0 27.9 11.5 24.3 12.6 Singapore -9.2 7.0 9.2 11.1 21.6 18.7 4.2 Thailand -4.3 10.1 5.6 8.5 0.7 10.8 5.9 Philippines 7.6-7.5 6.3 24.0 10.0 21.0 - US 0.1 0.5 3.6 7.2 6.0 6.4 5.0 China -7.9-1.5-6.2 7.6-1.5 16.4 8.0 Japan -10.3-0.4 5.4 1.3 11.3 12.0 7.5 Source: Bloomberg, BIMB Securities Moving forward, we are of the view that the recovery in global trade remains on track, indicated by the strong pick-up in exports across the region since late last year. With the expectation of pick up in global economic growth and factoring in 1Q17 performance, we revised growth in gross exports and gross imports to +10.5% (2016: +1.1%) and +13.0% (2016: +1.9%) respectively on account of: 1) Recovery in demand for commodity products, aided by higher prices; 2) Pick-up in global semiconductor sales since late 2016, translating into higher E&E exports; 3) Improving global trade outlook on the back of stronger global growth prospects. Higher growth forecast for gross exports and imports could in turn translating into firmer growth in real exports and imports of goods and services of +8.0% (1.8% previously; 2016: +1.1%) and +10.0% (+1.9% previously; 2016: +1.1%) respectively. www.bimbsec.com.my 5
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