Thursday 9 August 2012

Malaysia External Trade Exports growth grew by 5.4% in June, imports by 3.6%


 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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