Ex­ports hit record high in Oc­to­ber

Man­u­fac­tured goods and strong China de­mand drive ship­ments

The Star Malaysia - StarBiz - - Front Page -

PETALING JAYA: Amid ris­ing global trade ten­sions, Malaysia’s ex­ports rose to a record high of RM96.4bil in Oc­to­ber af­ter grow­ing at a higher-than-ex­pected rate of 17.7% from a year ago, powered by man­u­fac­tured goods, and with ship­ments to China pick­ing up strongly.

Adding to the pos­i­tive devel­op­ment was the fact that the coun­try’s trade sur­plus widened to the high­est-ever recorded of RM16.3bil from RM15.3bil in the pre­ced­ing month, or up 63.1% from about RM10­bil a year ago.

Ac­cord­ing to the Sta­tis­tics Depart­ment, ex­port growth in Oc­to­ber was driven pri­mar­ily by in­creased ship­ments to China, in par­tic­u­lar, and fol­lowed by Hong Kong, Sin­ga­pore, Tai­wan and Aus­tralia.

Prod­uct-wise, growth was driven by elec­tri­cal and elec­tronic (E&E) prod­ucts, re­fined petroleum prod­ucts, liq­ue­fied nat­u­ral gas (LNG), crude petroleum and tim­ber prod­ucts.

The strong ex­port per­for­mance in Oc­to­ber ex­ceeded an­a­lysts’ ex­pec­ta­tions for a growth of 5.8% year-onyear (y-o-y), and for the coun­try’s trade sur­plus to nar­row to RM11.6bil.

Dur­ing the month in re­view, Malaysia’s im­ports grew 11.4% to RM80.1bil, with growth mainly at­trib­uted to in­creased pur­chase of con­sump­tion goods and in­ter­me­di­ate goods, while im­port of cap­i­tal goods shrank.

MIDF Re­search noted that the ex­port growth rate in Oc­to­ber – the sec­ond high­est of the year – sig­nalled a bet­ter out­look for the fourth quar­ter of 2018.

“Ex­port growth for the third quar­ter of the year av­er­aged at 5.3% y-o-y (the low­est gain in seven quar­ters) from 8.4% y-o-y in the sec­ond quar­ter.

“How­ever, look­ing ahead to the fi­nal quar­ter of 2018, we ex­pect ex­port to per­form bet­ter than the ear­lier three quar­ters, in line with our yearly forecast of 7.3% y-o-y (growth),” the bro­ker­age said in its re­port.

In 2017, Malaysia reg­is­tered a full-year ex­port growth of 18.9% y-o-y.

Ex­plain­ing its ex­pec­ta­tion of a slower ex­port growth for 2018, com­pared to the prior year, MIDF Re­search said that for the first 10 months alone, Malaysia’s ex­ports had al­ready slowed dras­ti­cally to 7.5% y-o-y, com­pared with a dou­ble-digit growth of 21.2% y-o-y in the cor­re­spond­ing pe­riod in 2017.

“The mod­er­at­ing pace is con­sis­tent with global com­mod­ity prices, ex­pec­ta­tion of a slight slow­down in over­all busi­ness per­for­mance on top of the un­cer­tainty over Sino-US trade con­flict,” it said.

MIDF Re­search pointed out that risks to the global econ­omy re­mained de­spite the re­cent trade truce be­tween the US and China, as it did lit­tle to deal with the core stick­ing points of the duo’s eco­nomic ri­valry.

RHB Re­search In­sti­tute noted that Oc­to­ber’s ex­port growth surged strongly, mainly driven by front­load­ing ac­tiv­ity from Chi­nese im­porters in an­tic­i­pa­tion of fur­ther US tar­iff hikes.

The bro­ker­age’s economist Vin­cent Loo said the growth mo­men­tum might con­tinue in the com­ing months fol­low­ing the trade cease­fire and on­go­ing ne­go­ti­a­tions be­tween the US and China.

“We ex­pect the strong trade mo­men­tum to con­tinue in the com­ing months, as front­load­ing ac­tiv­i­ties will likely pre­vail fol­low­ing the trade cease­fire and on­go­ing ne­go­ti­a­tions be­tween the US and China.

“Bar­ring any new an­nounce­ments be­tween the two coun­tries, we are keep­ing our forecast for gross ex­port growth at a slower 4% in 2019, from 5.7% es­ti­mated for 2018, on ac­count of weaker global trade out­look and slow­down in de­mand from China,” Loo said.

Ear­lier in a state­ment, RAM Rat­ing Ser­vices Bhd re­search head Kristina Fong said de­spite the un­cer­tain­ties over the US-China trade war, Malaysia’s ex­port mo­men­tum in Oc­to­ber was strong as global value-chain ac­tiv­i­ties would likely be sus­tained by “front-loaded or­ders”.

This came amid greater con­cerns over the rise in US tar­iff rates – from 10% to 25% – on US$200bil worth of China’s im­ports that had ear­lier been sched­uled to take ef­fect on Jan 1, 2019.

Fong noted that while the slated tar­iff hike had now been put on hold for 90 days from Dec 1 to al­low time for fresh ne­go­ti­a­tions be­tween US Pres­i­dent Don­ald Trump and China’s Pres­i­dent Xi Jin­ping for a new trade deal, un­cer­tain­ties re­mained.

“Although this pauses an es­ca­la­tion of the trade war for now, un­cer­tain­ties still cloud ex­ter­nal de­mand prospects. As such, the cur­rent front-loaded de­mand mo­men­tum could ta­per off tem­po­rar­ily in the lead-up to the end of the 90-day win­dow next Fe­bru­ary,” Fong ex­plained.

Moody’s In­vestor Ser­vice echoed sim­i­lar sen­ti­ment, not­ing that de­spite a tem­po­rary de-es­ca­la­tion of hos­til­i­ties fol­low­ing the G20 sum­mit over the week­end, the re­la­tion­ship be­tween the US and China would re­main con­tentious, adding that the nar­row agree­ments and mod­est con­ces­sions in the on­go­ing trade dis­pute would not bridge the wide gulf in their re­spec­tive eco­nomic, po­lit­i­cal and strate­gic in­ter­ests.

“The US and China have dif­fer­ences that are deep and multi-faceted, lead­ing to di­verg­ing na­tional and com­mer­cial in­ter­ests,” Moody’s man­ag­ing di­rec­tor Atsi Sheth said.

“As China in­creases its in­flu­ence in global eco­nom­ics and pol­i­tics and the US re­trenches its in­ter­na­tional en­gage­ment, the re­la­tion­ship be­tween the two powers has en­tered a new, tense and uncertain phase,” he ex­plained in a state­ment.

Moody’s said nei­ther China nor the US would likely to cede its key na­tional pri­or­i­ties to defuse their ten­sions. How­ever, the rat­ing agency said, an eco­nomic cold war that could lead to de­cou­pling would be costly for both coun­tries, ow­ing to their in­ter­link­age.

There­fore, US-China re­la­tions would likely swing be­tween con­flict and com­pro­mise, Moody’s said, adding that wors­en­ing of ten­sions would dis­rupt global trade, erode the ef­fec­tive­ness of the in­ter­na­tional mul­ti­lat­eral trade regime and dampen growth, be­sides hav­ing a neg­a­tive im­pact on global credit con­di­tions.

In Oc­to­ber, Malaysia reg­is­tered an in­crease of 19.9% in ex­port of man­u­fac­tured goods to about RM81­bil, which ac­counted for 84% of the coun­try’s to­tal ex­ports dur­ing the month re­view.

Ex­ports to China, in par­tic­u­lar, picked up strongly in Oc­to­ber, ris­ing 33% y-o-y to RM15.1bil, while im­ports from the world’s sec­ond-largest econ­omy in­creased 7.6% y-o-y to RM14.59bil.

Over­all trade with China, which ab­sorbed 16.8% of Malaysia’s to­tal trade dur­ing the month, ex­panded by 19.1% y-o-y to RM29.7bil.

Strong per­for­mance: Con­tain­ers seen at North But­ter­worth Con­tainer Ter­mi­nal. Malaysia’s ex­ports rose to a record high of RM96.4bil in Oc­to­ber af­ter grow­ing at a higher-than-ex­pected rate of 17.7% from a year ago.

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