Malaysia exports bounced back in March to 2.2 per cent year-on-year (YoY), thus recovering from the preceding month’s temporary two per cent decline.

However, for the first quarter ended 31 March 2018 (1Q18), exports registered a sharp decrease of 5.8 per cent YoY from 4Q17’s 12.4 per cent, which is indicative of a slower gross domestic products (GDP) growth during the quarter, Kenanga Investment House opined.

Electrical and electronics (E&E) exports resumed on a positive growth trend following the preceding shorter working month’s 0.1 per cent YoY contraction.

"However, given that March’s E&E exports merely registered a single-digit growth at 8.7 per cent YoY, we are further convinced of our view that tech-upcycle has reached its peak and exports growth will remain on a single-digit trend for 2Q18,” said the research house in a note.

On month-on-month (MoM) basis, E&E exports rebounded strongly by 29.3 per cent in line with the month’s sustainably high global semiconductor sales at 20 per cent YoY.

Strong crude petroleum exports helped mitigated March’s commodities growth decline to a smaller 1.1 per cent YoY contraction, while crude petroleum exports growth surged 18.4 per cent YoY contributing a higher 0.7 percentage points (ppts) to the month’s overall exports growth.

According to the Department of Statistics, crude petroleum exports surged following an increase in both export volume and average unit value.

Brent crude prices also strengthened by 32.6 per cent during the month, averaging at USD70.27/barrel.

“However, exports of other commodities including palm oil, natural rubber and LNG were frailer, hence capping the growth of commodities during the month. On a MoM basis, commodities exports growth jumped 25.5 per cent,” said Kenanga.

Imports saw a decline of 9.6 per cent YoY with the month’s slowdown was broad-based across the imports of capital, intermediate and consumption goods and in line with the continued ringgit appreciation during the month.

“The average ringgit appreciated by 0.24 per cent following February’s 1.15 per cent appreciation. The higher ringgit value possibly lowered the translation of the value of the imports during the month,” said Kenanga.

Consequently, trade surplus widened to RM14.7 billion, while total trade contracted further by 3.5 oer cent YoY to RM154.2 billion.

“March’s rebound in exports failed to allay our view that exports will moderate in 2018. Our view is largely based on moderating global semiconductor sales, which has contracted by 2.5 per cent QoQ in 1Q18,” said the note.

“We are also observing sharp slowdown in exports growth of key hi-tech economies in April, including South Korea and Taiwan, potentially signalling the reversal of the global tech upcycle. Moreover, on a 3 month moving average basis (3MMA), exports have been on a moderating trend for the past six months, hitting 5.8 per cent YoY in March, lowest since Dec 2016.”

Manufacturing indicators are also pointing to easing growth ahead.

“We are also wary of the effect of the US tariffs on China’s technological goods and its indirect effect on Malaysia’s exports of E&E subcomponents,” said the note.

“Based on the 1Q18 exports performance, we maintain our expectation that GDP growth would continue to moderate which we estimate to record a 5.7 per cent growth in the 1Q18 (4Q17: 5.9 per cent).and subsequently continue to taper towards the year end. We maintain our GDP growth forecast of 5.5 per cent for this year.”

The research house forecasted a growth of 5.9 per cent last year.

By New Straits Times(Published: 07/05/2018)

https://www.nst.com.my/business/2018/05/366791/exports-unlikely-moderate-2018-kenanga

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