KUCHING: Following a strong, double-digit exports growth in April, analysts believe that Malaysia’s exports could moderate but remain steady in the second quarter of 2018 (2Q18).
In April, Malaysia’s exports growth hits its highest ever April value, at 14 per cent year-on-year (y-o-y), compared with a 2.2 per cent growth in March, backed by stronger growth in electrical and electronics (E&E) and petroleum products.
It was also significantly higher than market expectations of 6.8 per cent.
In a report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said: “Looking at our regional partner’s trade performance such as Vietnam and South Korea, exports in May-18 increased by 7.1 per cent y-o-y and 13.5 per cent y-o-y respectively.
“Based on manufacturing condition and activity, both global and emerging economies manufacturing PMI figures declined to 53.1 points and 51.1 points respectively however still maintain on expansionary trend.
“Henceforth, we predict global trade activities in 2Q18 to remain on an upbeat momentum albeit at a moderating pace, in tandem with easing global manufacturing PMI. In addition, protectionism threat remains as global downside risks.”
Meanwhile, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) noted that Malaysia’s IHS Markit PMI has reported further deterioration in May as weak external demand continues to weigh on new orders and output.
With the expectation of declining oil prices as well as rising concerns over the trade tensions between US and China, it expected exports to remain lacklustre in the coming month.
“Nonetheless, we expect the weaker ringgit, which fell by two per cent during the month to bolster exports in May.
“Based on recent development of external as well as domestic factors, we have revised our GDP growth forecast to 5.1 per cent for 2018 from 5.5 per cent (5.9 per cent in 2017),” it said.
On the performance of Malaysia’s trade, Kenanga Research explained that stronger oil price drove crude petroleum exports growth to 22.7 per cent y-o-y in April (18.4 per cent in March).
“Brent crude oil prices averaged US$75.2 per barrel in April, an increase of 43.8 per cent from US$52.3 per barrel a year ago.
“Meanwhile, exports of petroleum products surged 38.9 per cent y-o-y (from down 8.6 per cent in March), contributing a higher two percentage points (ppts) to the month’s overall exports growth (from down 0.5 percentage points in March),” it added.
By destination, the research team said Malaysia’s y-o-y growth in exports was mainly attributed to expansion in exports to Hong Kong and China which surged to 113.8 per cent and 22 per cent respectively (62.1 per cent and down 4.7 per cent in March ).
“This is in line with better growth indicators of Hong Kong and its proximity to China’s economy during the month,” Kenanga Research added.
Meanwhile, the research team noted Malaysia’s imports rebounded after two months of decline to 9.1 per cent y-o-y (down 9.6 per cent in March).
“The month’s imports came in closer to the house estimate of eight per cent but surpassed Bloomberg’s median estimate of 3.8 per cent.
“The month’s growth was contributed by imports of capital goods which rebounded to 4.8 per cent y-o-y (down 30.4 per cent in March) following higher imports of transportation equipment,” it explained.
Overall, the average value of Malaysian ringgit to US dollar appreciated by 0.43 per cent following March’s 0.24 per cent appreciation which possibly drove imports during the month.
As for imports of intermediate and consumption goods, Kenanga Research said it contracted by 11.9 per cent y-o-y and 1.8 per cent respectively.
“Following the month’s rebound in imports, trade surplus narrowed to RM13.1 billion from March’s RM14.7 billion.
“Although total trade rebounded sharply by 11.7 per cent y-o-y, it grew by a marginal 0.8 per cent month-on-month (17.1 per cent in March),” it added.