Malaysia: January 2019 trade


HIGHLIGHTS

January 2019 trade

  • Malaysia registered a larger trade surplus of RM11.5bn in Jan as the expansion in exports was greater than the growth in imports.
  • External headwinds took a toll on manufactured exports, a trend that may persist in the near-term based on the latest PMI readings.
  • Apart from a rebound in LNG, commodity exports trended lower in Jan.

Trade surplus widens to RM11.5bn in January
Malaysia’s trade surplus expanded in January, though broadly in line with our expectations (+RM11.5bn vs. +RM10.7bn in December). Even so, total trade was better than expected (+2.1% yoy vs. +3.2% yoy in December) as the growth in exports (+3.1% yoy vs. +5.1% yoy in January) and imports (+1.0% yoy vs. +1.0% yoy in January) fared better than we had forecast.

External headwinds dent manufactured exports
Slowing external demand took a toll on Malaysia’s exports of manufactured goods (+2.9% yoy in January vs. +8.1% yoy in December), an outcome telegraphed by the consistent slippage in the forward-looking manufacturing PMI for Malaysia (47.6 in Feb vs. 47.9 in January), amid a slippage in new orders from abroad. Export outperformers experienced smaller gains: E&E (+8.2% yoy in January vs. +14.2% yoy in December) and chemical & chemical products (+16.7% yoy in January vs. +36.6% yoy in December). The sharp contraction in exports of optical & scientific equipment persisted for a third straight month in January (-44.7% yoy vs. – 39.5% yoy in December) while shipments of machinery, appliances and parts turned negative (- 1.5% yoy in January vs. +7.4% yoy in December).

First contraction in O&G since Jul 2018
Despite a rebound in demand growth for LNG (+37.5% yoy in January vs. -2.7% yoy in December), other commodities trended lower in January. Crude petroleum exports registered its first contraction in more than a year (-1.1% yoy in January vs. +21.5% yoy in December) and refined petroleum product shipments worsened (-29.9% yoy in January vs. -1.4% yoy in December). Palm oil deliveries remained in the red in January (-16.6% yoy vs. -19.3% yoy in December) as higher volumes were offset by lower export prices versus a year ago.

Import growth remains stable
Import expansion stayed steady in January (+1.0% yoy vs. +1.0% yoy in December) as growth in import volumes improved (+0.8% yoy vs. -0.8% yoy in December). Demand for intermediate goods was modest in January (-0.8% yoy vs. +2.8% yoy in December) as factories turned more cautious on business activity and inventory management. Imports of consumption goods climbed at a slower pace (+3.3% yoy in January vs. +5.7% yoy in December) due to processed F&B, as festive restocking was brought forward due to the Lunar New Year falling earlier in 2019.

More positive catalysts in 2H19
While the outlook for export-oriented manufacturers remains muted in 1H19, we expect a cyclical upturn in 2H19, and a recovery in commodity output to underpin gross exports growth of 6.7% in 2019F. Risks include a sharp downturn in major economies and a re-escalation of US-China trade tensions, against current expectations of a rollback in tariffs.

Originally published by CIMB Research and Economics on 4 March 2019.

This article has been edited to reflect its time-sensitivity.