EXPORTS, IMPORTS SHRINK IN OCTOBER
Subdued global trade performance and high base effects from last year to blame for lacklustre showing, says RAM Ratings
RAM Ratings expects Malaysia’s exports and imports to have shrunk by 8.2 and 6.8 per cent, respectively, in October, resulting in a trade surplus of RM14.4 billion.
RAM Ratings head of research Kristina Fong said the continued lacklustre showing was underlined by subdued global trade and industrial performance, along with last year’s high base effects.
She said the fruition of a preliminary United States-China “phase one” deal was unlikely to spark an immediate revival in trade momentum as businesses would remain wary of uncertainties in the subsequent phases.
The recent US legislation supporting anti-government protesters in Hong Kong might complicate future trade negotiations with China, she added.
“Given the past flip-flops on both sides, more progress will be needed to revive business optimism and, consequently, any notable rebound in global trade,” she said.
The ratings agency pointed out the first phase of the trade deal was also unlikely to reverse any realignment in supply chains arising from the dispute.
Largely induced by the US’ more prohibitive trade barriers against China, major Asian exporters of electrical and electronics (E&E) goods had seen a marked decline in their exports to China.
As a consequence, regional distribution patterns have also changed as producers try to circumvent such barriers.
While some economies such as Taiwan have gone on to exporting directly to the US, RAM Ratings noted that some producers like South Korea and Malaysia had diverted their supplies to new production hubs in Vietnam and Taiwan.
Despite this year being a weak year for the semiconductor sector, recent shipment trends indicated the decline may have bottomed out.
Fong said there were some bright spots for the E&E sector, including falling inventory-toshipment ratios for major regional tech exporters and also a gradual pick-up in orders.
“The rollout of new products in the tech space, such as those related to 5G technology and the Internet of Things, could also lend some support to this sector.
“All these factors should shore up the resilience of the E&E sector, a key export for Malaysia,” she added.