- Ongoing uncertainties in the global economy, especially in
regard to the Eurozone debt crisis, led Malaysia’s export demand to contract
for the first time in 28 months.
- After recording a substantial increase of 14.5% in
February, export growth plummeted to a 28-month low of -0.1% YoY in March as
demand for key products such as E&E and palm oil to major economies
significantly declined.
- The decline was in contrast to market expectations of
+2.9% YoY (source: Bloomberg poll) and our estimate of +3.4%.
- However, on average, exports grew by 4.4% YoY to
RM173.72bil in 1Q12 from a growth of 4.9% YoY or RM166.4bil in 1Q11.
- Apart from the external demand woes, Malaysian trade in
March was also heavily impacted by cyclical factors on the back of the
festivities in the first month of the year.
- Also, we attribute the seasonal variation to the high base
factor, immediately after the festivities in March of 2011, when work resumed
to normalcy.
- While imports continued to outpace exports for the fifth
straight month, growth still decelerated to a 29-month low of +1.6% YoY in
March (+18.0% in February).
- Among the goods, the E&E export - Malaysia’s largest
export category with an estimated percentage share of around 33% of total
exports - contracted by 6.0%YoY, reversing from an expansion of 7.8%YoY in
February.
- Commodity exports were also weak in March, in line with
the slowing demand from China and India. In particular, exports of palm oil
fell sharply by 17.6% YoY during the month (+7.9% YoY in Feb).
- Bucking the trend, liquefied natural gas (LNG) grew by
45.3% YoY (February: +36.1% YoY), supported by healthy levels of demand
emanating from Japan.
- Overall, the slowing external demand was very much in line
with the slower economy in major economies in the region as well as in the Euro
area. In this regard, exports to China decreased by 11% YoY in March, while the
ongoing debt crisis led exports to the Eurozone to fall 16.2% YoY.
- Moving forward, in line with the trade performance, we continue
to believe the 1Q12 GDP would likely remain weak between 4.5 and 5%. This is
not a cause for concern at all, as it is still near the trend-wise growth of
5%.
- For the remainder of the year, however, we expect GDP
growth to improve, even rebounding sharply to near 6% by 2H12, which would give
us an average annual growth rate of 5% this year.
- Apart from a strong domestic demand, we also anticipate
some stability in the Eurozone economies by the end of the year, a stronger US
economy in the coming quarters, as well the further roll-out of major ETP
projects in the coming months. In addition, the moderating inflationary
pressure would also be positive for the domestic economy in 2012
Source: AmeSecurities
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