Exports in the month
of August suffered a 4.5% YoY decline,
falling worse than the expected -1.7% forecasted by the market. Even though it
is unsurprising to attribute Eurozone’s decline in demand, China’s dwindling demand
also contributed to August’s weak exports. Compared to the previous month
exports suffered a 3.7% drop and year-to-date, it grew 2.3% compared to 7.4% in
the same period last year.
Imports fared
comparatively better, expanding by 2.8%. However, compared to the previous
month, it fell by 10.3%, lowest monthly fall since January 2012. Despite
imports doing better than exports, total exports had exceeded imports, which
led to the trade surplus expanding by RM7.1b from RM3.6b. Total trade in August
recorded at RM104.8b and RM868.8b year-to-date.
Most major export
groups continued to feel the brunt of slowing demands from advanced
economies. Electrical & electronics
(E&E) shipments continued to fall, this time by -5.2% YoY and -2.6% MoM,
testimony of the declining situation in the Eurozone, with also relates to the
slowdown in demand from China. Once again though, there was an improvement in
E&E exports to the USA. There were also E&E exports expansion to
Singapore and Taiwan.
Palm oil and palm oil
based products (which make up to 10% of total exports) fell by 25.3%. Palm oil
exports fell by 27.7% due to a decrease in volume as well as price. Crude
petroleum exports fell by a sharp 29.8% but the exports of petroleum products
expanded by 39.9%. As we had hoped LNG
exports made a rebound in August, increasing by 38.3% as both volume and price rose,
by 22.4% and 13.0% respectively.
At RM7.61b Singapore
was Malaysia’s top export destination in August, which charted a 7.3%
growth. As an intermediary exporting
country, they could be seen as a compass to the performance of western
economies therefore we do not think that this growth is sustainable, as
Singapore’s own export numbers in August fell by 10.6%. Exports to the USA
continued to expand, though this time at a slower pace of 4.2% from 14.6%
previously. This is the result of higher shipment of E&E (+12.0%) and palm
oil (+19.3%). Japan’s demand improved by
15.4% as orders for LNG increases and is
expected to expand even more so now the new power policy implemented seeks to
end Japan’s reliance on nuclear power by 2030.
Despite China’s being Malaysia’s 2nd export destination in August, at RM7.51b, it
was a 10.6% decline giving proof to their own slowing domestic demand as well as
feeling the pinch from the lack of orders for Europe and the US. Exports to the
EU remain at a grim 24.2% contraction.
On the domestic
front, imports once again exceeded
expectations. There was a
double-digit growth of 34.3% in capital imports. This level of expansion is expected to
continue as major developments under the ETP remains at full steam.
Similarly, domestic consumption remains
strong at 14.1% growth. Only
intermediate imports suffered decline (-2.9 YoY), indicative that the
overall global demand moving forward is not expected to be strong.
Looking forward, we
do not expect the overall global situation to improve, not with Europe
struggling to keep the Union intact and the USA not rebounding as well as hoped
despite the election year. It is just as well that the government initiated the
Economic Transformation Programme when it did to mitigate the negative
externalities. Without the booster from
gross fixed capital formation to spur domestic economic growth, Malaysia
would not have been cushioned from the weak global demand as well as it has
been. Nonetheless, given the slowing
external demand, we are projecting growth of value added exports of goods and services
to slow to 1.8% in 2H12 from 2.5% in 1H12. In contention with a stronger
domestic demand, this would likely result in a slower GDP growth of 4.9% in the
2H12 from 5.1% in 1H12. For now, we are maintaining our GDP forecast of 5.0%
for 2012.
Source: Kenanga
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