KUCHING: The palm oil segment supplemented headline exports growth in April as the sector expanded 24.1 per cent and adding a modest 1.9 ppt to growth.
Improvements in palm oil are observed in both average unit value and export volume, said researchers with Kenanga Investment Bank Bhd (Kenanga Research) in a note yesterday.
Exports retained a double-digit growth of 20.6 per cent, it said, albeit weaker than March’s 24.1 per cent growth.
“April’s exports were spot on the Bloomberg’s median consensus estimate, though it was slightly higher than the house estimates of 19.8 per cent. April’s figures extend the export YoY growth streak to six consecutive months, starting November 2016.
“On a monthly basis, exports fell 10.5 per cent, falling back below the RM80 billion mark which it breached in March. After seasonal adjustment, exports contracted by a more modest 3.9 per cent month on month (m-o-m).”
Imports took a breather in April, growing by a slower 24.7 per cent after hitting an 84-month high of 39.4 per cent in March, below both the consensus and house estimates of 31.3 per cent and 32.2 per cent respectively.
Despite the contraction in imports, Kenanga Research said imports’ year on year (y-o-y) growth remains elevated relative to its historical data.
“In m-o-m terms, imports declined by a sharp 15.6 per cent. After seasonal adjustment, the fall in imports remained double-digit at minus 12.5 per cent.
“As with the previous month, the expansion in imports was largely broad-based with imports of intermediate goods at the helm. Intermediate imports YoY growth remained strong at 29.2 per cent but slower than March’s 36.3 per cent, adding 16.6 ppt to headline import growth.
“This was fuelled by a mixture of intermediate imports of processed industrial supplies, primary lubricants and imports of accessories and parts of transportation equipment, which accounted for a combined 14.8 ppt to import growth.”
In a separate note, Ambank Research expects the positive trend from exports to continue in the coming months, supported by a combination of steady export volume growth, firm commodity prices as well as low base.
“Our 2017 global growth projection remains at 3.3 per cent in 2017 and 3.5 per cent in 2018 with our export volume growth at 3.0 per cent in 2017 and 3.4 per cent in 2018,” it noted.
“While the current export and import data looks promising – supported by a recovering global demand and an easing potential trade war threat – we believe there is still downside risk to growth.
“Key data such as the Purchasing Managers’ Index remains less exciting. It fell to 48.7 in May after a brief 50.7 reading in April, which is an expansion, dragged by lower new export work as well as lower new orders.
“Inventory level has also depleted and firms are busy streamlining stocks amid subdued demand. It points to potential weaknesses from manufacturing due to weak domestic and external demand.”
On this point, Kenanga Research said its projection of a mild moderation of real and export growth is underpinned by its expectation that the technological equipment upgrade cycle may have peaked in 1Q17.
“However, notwithstanding peaking growth, we believe that export YoY growth levels will remain elevated going forward largely due to the base effect drawn from the relatively moribund trade growth observed from 1Q16 to 3Q16.”