Malaysia’s trade performance misses expectations

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Source: OCBC, Bloomberg

KUCHING: Malaysia’s trade prints fell short of expectations with its market year-on-year growth of November 2019 exports falling at a flat zero; actual one contracted by 5.5 per cent while imports shrank by less than anticipated.

“As if to remind us at the start of 2020 that life is about give and take, Malaysia’s November trade figures surprised on the downside considerably, following an upside beat the month before,” OCBC Bank economist Willian Wiranto commented in the bank’s treasury research report.

“The latest exports print showed that value of shipments contracted by 5.5 per cent y-o-y, compared to market expectation for a flat growth of zero per cent. In seasonally adjusted terms, the data showed a sequential contraction of 11.2 per cent through the month of November, compared to an outsized uptick of 13.2 per cent prior.

“The swing appears to be primary driven by the about-turn in the shipment of electrical and electronic products, which make up more than a third of total exports.

“It swung from a sequential positive growth of 28.8 per cent in non-seasonally adjusted terms in October, to a contraction of 26.2 per cent in the latest data, swamping the pick-up in exports of petroleum products,” Wiranto added.

Meanwhile, OCBC pointed out that imports shrank less than expected. Instead of printing five per cent y-o-y growth that market expected, it came in at 3.6 per cent.

“The sub-readings showed a pick-up in capital goods imports, which came in at RM9.8 billion compared to an average of 8.1bn in the prior three months. If the uptick sustains itself in the coming months, it should bode well for investment activities cycle.

“Trade surplus came in at RM6.4 billion, the lowest since September 2018. Again, a ‘payback’ perhaps for the fact that the prior month’s print marked the highest monthly surplus since at least 1990, at 17.3 billion,” Wiranto commented.

“Overall, given the relatively backward-looking nature of the November trade figures – reflecting a time when the question of whether there would be an escalation in US-China trade conflicts loomed large – we doubt that Bank Negara will be rushed into concluding that the prospect for Malaysia’s exports in 2020 is an irredeemably gloomy one.

“Indeed, on our end, as much as our fingers are still crossed, we see the recent détente allowing some recovery in global trade flows, which would be enough to allow exports to grow four to five per cent this year in nominal terms, compared to a two per cent decilne that we are likely to see for full-year 2019.

“Hence, as much as we think that BNM may cut up to 50bps this year, the next meeting on January 24th will likely still see a stay on the OPR, as it awaits 4Q GDP data due out on February 14,” Wiranto concluded.