M’sia sustains strong export growth in March
KUCHING: Malaysia’s strong export growth momentum – which saw a strong 26.5 per cent year over year (y- o-y) increase in February – has sustained itself as March figures showed a steady 24.1 per cent y- o-y uptick.
According to the research arm of Affin Hwang Investment Bank Bhd (AffinHwang Capital), March’s growth was higher than market expectations of 20 per cent y- o-y.
This was mostly attributed to higher exports of mining goodsrelated components, including crude petroleum, refine petroleum products and liquefied natural gas ( LNG).
“Demand for crude petroleum continues to increase from 50.3 per cent y- o-y in March, while refined petroleum products rose by 51.6 per cent,” said the research arm in a note yesterday.
LNG also saw its third consecutive month of positive growth with a 11.5 per cent y- oy growth due to higher average unit values and increasing export volume demand from Japan.
“As for agricultural goods, exports of palm based products slowed to 22.9 per cent y- o-y following the sharp increase of 63.5 per cent in the previous month ( February). Natural rubber, however, saw a steep climb of 111.4 per cent y- o-y in March.”
Besides this, the team over at Kenanga Investment Bank Bhd ( Kenanga Research) saw that export growth was largely supported by continued growth in the electrical and electronics ( E& E) export segment which accounts for 35.4 per cent of total exports.
“Exports of E&E products saw a respectable 21.2 per cent growth in March and contributed to 7.7 points of export growth,” guided the analyst.
In tandem with sustained export growth, imports growth led by capital led by capital goods were also observed to have surged to its highest level in seven years at 39.4 per cent y- o-y in March.
The surge outpaced export growth and resulted in further narrowing of trade surplus which now stands at an substantial amount of RM85 billion from RM87.3 billion in 2016.
Taking into consideration these newly posted export figures, both analysts are expecting increased growth in the export sector to continue and have revised their estimates for the sector for the year upwards to ref lect this newfound optimism.
Affin Hwang Capital is expecting exports to be highly supported by Electrical and Electronics ( E& E) products with higher demand from advanced economies such the US and EU, as well as healthy demand from China on semiconductor products.
“Ac c o r d i n g to the Semiconduc t or Indus t ry Associat ion ( SIA) , global semiconductor sales growth continued to increased steadily from 16.5 per cent y- o-y in Feb to 18.1 per cent in March – the highest level since Oct 2010 – with all major countries recording doubledigit growth during the month,” recounted the research arm.
That being said, AffinHwang Capital expects Malaysia’s real gross domestic product (GDP) growth to recover strongly above 5 per cent in 1Q17 – higher than their previous estimate of 4.7 per cent.
Exports of goods and services are also expected to expand by 2 per cent in FY17 and imports of goods and services by 1.9 per cent in FY17.
Meanwhile, Kenanga Research is anticipating external trade’s growth momentum to continue at an increased pace of 4.8 per cent in 1Q17 from 4.4 per cent and a full year growth forecast of 4.8 per cent from 4.5 per cent.
“March’s external trade data further reinforces the case of a recovering external demand. This, along with the healthy growth in domestic production and PMI advancing above the 50.0 threshold, lends further credence to our upward revision of the 1Q17 and 2017 growth forecast,” justified the research arm.
Despite the rather rosy outlook, Kenanga Research still remains rather cautious on overall trade as they fear potential inventory excess down the line.
“Given import growth outpacing that of exports, we are cautious on a possible build-up inventory in excess to actual external demand, potentially putting growth momentum at risk when external demand dried up.”
These concerns however, would be alleviated once stronger signs of domestic demand strengthening emerge.