The month of June saw
a slight deceleration of exports, growing by 5.4% YoY in comparison to 6.7% in
May. This is mainly due to a slowdown in the demand from the USA and the EU.
Regardless, it still beats market expectations of 3.1%. Compared to the
previous month, there was a 3.7% improvement and for the first 6 months of the
year, total exports grew by 4.2% compared to 6.8% in the same period in
2011.
For the first time in
7 months imports grew at a slower pace than exports, gaining only 3.6% YoY in
June. On a monthly basis, it fell by 4.4% and yearto-date, registered an 8.0%
growth. With stronger exports gains,
trade surplus widened to RM9.2b in June whilst total trade for the 1H12
added up to RM51.5b.
E&E exports continued
on a positive path having gained 2.1% YoY, attributed by higher shipments to
Hong Kong, USA, Japan, Vietnam and China. E&E exports tallied to RM114b for
the first half of the year. As of late, most of the demand for E&E has been
coming from Asia but the gradual improvement coming from the USA (+9.1% in
E&E exports) is a small beacon of light for the largest economy in the
world. However, the question remains whether or not this is a prelude to a
sustainable recovery or simply a spike due to the summer season.
The mining and
commodity sectors have been faring well, growth gaining 5.9% YoY in June. This
is due to strong exports of LNG (+25.6%) and refined petroleum products
(+38.5%). Palm oil, Malaysia’s 3rd largest exports still remains in negative
territory, contracting by 14.1% in June. We believe is due to the drop is CPO
prices and production. However, we do expect a rebound further in the
year.
Looking into
individual trade partners, China is Malaysia’s top export destination in June,
recording at RM8.3b (+13.2%) and closely followed by Singapore at RM7.9b
(+1.8%). Strong demand for LNG as well
as crude petroleum are the main drivers of exports to Japan, a staggering 24.9%
increase (RM7.1b) in the month of June.
Despite the restarting of some nuclear power stations in Japan, dissent
from the public has pushed authorities and suppliers to strongly consider
alternate means of power. Exports to the
USA slowed slightly, to 4.9% from 16.6% previously. It is unsurprising to find
the exports to the EU fell by 8.4% as
the European economy remains austere. Even powerhouse Germany suffered a 1.5%
fall in their June exports.
Moving on to the
domestic situation, for the first time in months, imports fell below
expectations. This is due to the 4.8% fall in intermediate goods, which takes
up 61.2% of total imports. There is caution to be heeded here, as intermediate
imports are indicative of exports ahead. However, capital imports remains strong at 15.8%,
indication in-line development under the ETP. Consumption is also steady at
double digit expansion, gaining 11.2%. The weakening of the MYR to the USD in
June did little to hinder the strength of imports.
Despite domestic
strength, fact is Malaysia is not entirely buffered from the situation
overseas. Given the deteriorating environment in the Eurozone and the sluggish
outlook of the US economy in the 2H12, it is likely that external demand will
not pick up as swiftly as we had hoped. There is a possibility that we may
revise our GDP for the whole of 2012 as we expect Malaysia’s 2Q12 GDP growth to
taper off further from 4.7% registered in the 1Q12. Until then, we maintain our
2012 GDP is 5.0%.
Source: Kenanga
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