Commodities, E&E drag Malaysia’s exports in November
KUCHING: November’s export growth decreased significantly to 1.6 per cent year on year (y-o-y) from a nine-month high of 17.7 per cent in October, underperforming Bloomberg’s consensus and house estimate of 6.6 and 6.1 per cent respectively.
On a monthly basis, this was a contaction of the fastest pace in nine months.
Apart from reflecting high base effect from the previous year, export growth was mainly dragged by slowdown in exports to regional peers, particularly for palm oil and palm oil-based products, as well as electrical and electronic (E&E) goods.
As exports slowdown outpaced imports, Kenanga Investment B an kBhd’ s research arm( Ken an ga Research) saw that Malaysia’s trade surplus narrowed to its lowest in 3 months at RM7.6 billion from October’s record-breaking high of RM16.3 billion.
“By product, lower shipments of palm oil and palm oil-based products and electric and electronics( E& E) have more than offset larger shipments of refined petroleum products, liquefied natural gas (LNG) and crude petroleum,” it said in a note yesterday.
“Exports of palm oil and palm oil- based products extended its contraction by 18.6 per cent y-o-y, dragging overall export growth by 1.5 percentage points (ppt), underpinned by declining shipments of palm oil.
“This comes amidst soft demand, typically seen during winter season as palm oil solidifies in low temperature, and prices weighed down by near-two decades of high stockpiles.
“Exports of E&E registered its sharpest decline for the year at minus 1.7 per cent t-o-t against 23.3 per cent seen in October. This pulled overall export growth by 0.6 ppt, driven by lower shipments of thermionic valves and tubes, photocells and integrated circuits, in part reflecting sluggish demand in key markets amid negative spillovers from US-China trade war.”
On a country basis, Affin Hwang Investment Bank Bhd (AffinHwang Capital) saw slower demand across the board by countries.
Malaysia’s exports to Asean countries slowed to 6.4 per cent y-o-y in November, after a strong double-digit growth of 16 per cent in October, supported mainly by healthy exports of crude petroleum, E& E products and petroleum products, while demand for other products remained weak.
“Export growth to China continued to be positive, albeit at a slower pace of 3.9 per cent y- o-y in November, sharply lower than the 33 per cent in October, dragged down by lower demand for E& E products, but cushioned by higher exports of chemicals and chemical products, petroleum products and LNG.”
AffinHwang Capital saw that export growth to the US declined by 3.6 per cent yoy in November, after two straight months of positive rises, weighed down by weaker demand for manufactured goods, namely E& E products.
Similarly, export growth to the EU also declined by 7.7 per cent due to lower demand for E& E products.
“Malaysia’s exports to Japan also declined by 8.9 per cent in November, after a strong growth of 10.1 in October, amid lower demand for manufactured goods -- particularly E& E products, manufactures of metals, optical and scientific equipment, iron and steel products as well as palm oilbased manu factured products,” it said.
Going into 2019, AffinHwang Capital said given that the global economic slowdown is not synchronised, exports of noncommodity products is expected to remain healthy from demand from advanced economies for E& E products in 2019, especially from the US.
However, with global semiconductor sales expected to grow at a slower rate of around 2.6 per cent y- o-y in 2019, the research house believe Malaysia’s real exports of goods and services will be sustained at a modest growth rate of 1.6 per cent for 2019, compared with 1.4 in 2018.
“According to a study by Bank Negara Malaysia ( BNM), Malaysia’s E& E industry (as a result of the US- China trade war) will likely gain from some potential trade diversion of US imports from China, where E& E products such as electrical machines, electronic integrated circuits and semiconductors for solar panel cells are anticipated to benefit.
“We are maintaining our fullyear trade surplus forecast of around RM120 billion in 2018 followed by a surplus of about RM100 billion projected for 2019.”
RHB Research Institute Sdn Bhd ( RHB Research) economist Vincent Loo in his note also expect export growth to slow further to four per cent in 2019 froma previous estimate of 5.7 per cent for 2018.
This was on account of a weaker global trade outlook and slowdown in demand from China.
“In contrast, Malaysia’s current account surplus of the balance of payments is expected to widen for 2019 to RM38.8 billion or 2.5 per cent of gross domestic product (GDP) from 2.2 per cent of GDP for 2018 on the back of lower imports of goods and services following the deferment of infrastructure projects.”