Firm exports lend support to stronger trade outlook
KUCHING: Malaysia’s exports improved steadily since the initial shocks from the pandemic in April and May, in line with the resumption of activities globally and benefiting from China’s recovery, the country’s main trading partner.
The team behind MIDF Amanah Investment Bank Bhd (MIDF Research) recapped that Malaysia’s exports continued to be in positive territory in November at 4.3 per cent year on year (y-o-y) – higher than tepid growth of 0.2 per cent yo-y observed in the preceding month.
Both domestic exports and reexports grew by 1.7 and 18.1 per cent y-o-y respectively. However, imports continued to contract at an even higher pace of nine per cent y-o-y, the largest drop since May this year.
Overall, total trade fell by two per cent y-o-y, slightly better than minus 2.5 per cent y-o-y registered in the prior month.
“Meanwhile, trade surplus recorded at 3-month low of RM16.8 billion. On monthly basis, however, both exports and imports declined by 7.3 and 1.9 per cents month on month (m-om) respectively,” it said.
“The overall weak picture suggests that manufacturers are still pessimistic on the future demand for their products hence are more cautious on any business decisions.
“On the back of the same demand concern and uncertainty over restrictions induced by Covid-19, some manufacturers might not be running at full capacity yet hence low demand for the inputs.”
A key trend seen is that exports to key trading partners, China and the US remain solid in November with growth of 13.2 and 24.6 per cent y-o-y respectively.
“This is the eighth straight month of growth in sales to China and sixth to the US,” MIDF Research continued. “Likewise, outbound shipment to other key countries like Japan, Hong Kong and India also grew.
“By region, exports advanced to the European Union but not to Asean as only Singapore managed to sustain positive growth at 15.4 per cent y-o-y while sales to the rest of the major Asean countries declined.”
Affin Hwang Investment Bank Bhd (AffinHwang Capital) noted that for the first eleven months of the year, exports growth declined by 2.6 per cent y-o-y with growth in imports declining sharply by seven per cent y-o-y.
“In the months ahead, we anticipate export growth to continue to show positive growth supported by improving external demand, especially from sustained overseas demand from China,” it said in its own report.
“In addition, the expected improvement in Malaysia’s other main trading partners such as the US, EU and Japan also bodes well for the country’s trade performance.”
Going into 2021, AffinHwang Capital believe Malaysia’s real exports of goods and services will recover at a growth rate of 7.2 per cent, compared with real imports of goods and services of 7.6 per cent for next year.
“We are maintaining our full-year growth forecast of a contraction of minus five per cent y-o-y in 2020, lower than the Treasury’s official projection of minus 4.5 per cent.”