RAM Ratings expects June shipments advancing 8.7%

KUALA LUMPUR: RAM Ratings expects Malaysia’s export growth to pick up to 8.7% in June from the 3.4% increase in May despite the envisaged slowdown amid the Hari Raya festive season.

It said steady demand from key export markets was expected to support June’s export growth due to continued improvement in their industrial activity.

In line with the projected acceleration in exports, which is usually accompanied by an uptake of imported inputs, import growth is envisaged to also rise to 8.1% in June.

“Re-stocking activities may appear quite resilient at the moment due to sustained global growth, but there seems little impetus to ramp this up significantly in the coming months amid the uncertainty over the current intertwining trade disputes,” said its head of research Kristina Fong.

She said that overall, the trade surplus was projected to come in at RM11.1bil for the month.

The Bloomberg consensus forecast is for an export growth of 11.5% in June at imports growth at 15.3% and trade surplus at RM9.30bil.

China’s import liberalisation (decreasing import tariffs on 1,449 consumer products) from July 1 onwards is expected to offer more opportunities to global exporters of consumer goods, acording to RAM.

In its fifth round of tariff cuts since 2015, around 60% of the consumer goods listed by China will now be subject to at least an 8% reduction in import tariffs. China has also lowered import tariffs on vehicles (from 20%25% to 15%) and auto parts (from 8%-25% to 6%). However, this import liberalisation is unlikely to result in direct substantial benefits to Malaysia’s export growth, as both its export exposure to this basket of goods and comparative advantage in production are low.

Malaysia’s exports of this basket of goods with liberalised tariffs constituted 8.6% of its overall exports in 2017, with those heading to China comprising only 0.3% of its total exports.