Exports and imports continued to stay in the negative region for the second consecutive month. Exports fell 0.5% y/y in March while imports dropped 0.1% y/y which bring 1Q2019 exports down 0.9% y/y while imports are at -2.8% y/y. Meanwhile, March’s trade surplus came in at RM14.4bil. The drag in exports came from the electrical & electronic (E&E) segment but was cushioned by resource-based products.

Given the less exciting numbers in 1Q2019, we believe 1Q2019 GDP will likely register a weaker number compared with 4Q2018 of 4.7%. Our preliminary estimation suggests the GDP for 1Q2019 should hover between 3.8% and 4.2%. With a weak outlook for the 1Q2019 GDP data, noises that Bank Negara may cut the 3.25% OPR in the coming May MPC meeting have gained traction. However, we feel the central bank will most likely hold the rate in May and institute a rate cut in July.

• Exports and imports continued to stay in the negative region for the second consecutive month. However, the March contraction turned out to be much smaller as compared with February’s. Exports fell 0.5% y/y in March from -5.3% y/y in February while imports dropped 0.1% y/y from -9.4% y/y in February. So, for 1Q2019, exports fell 0.9% y/y from +8.1% y/y in 4Q2018 while imports dropped 2.8% y/y versus +5.7% y/y in 4Q2018. Meanwhile, March’s trade surplus came in at RM14.4bil from RM14.7bil in February.

• The drag in exports came from the electrical & electronic (E&E) segment which fell by 1.9% y/y in March after a +4.9% y/y gain in February, reflecting the maturing tech cycle. Despite the drag from E&E, we found the slide in our exports was cushioned by resource-based products such as “ (1) petroleum products which surged by 26.2% y/y in March from -32.6% y/y in February; (2) liquified natural gas (LNG) rose firmly by 17.2% y/y in March from +8.6% y/y in February; and (3) chemical & chemical products, up 4.1% y/y from -4.2% y/y in February.

• Looking at imports, we found it to have improved across the board. Both consumer and intermediate imports climbed 10.5% y/y and 3.2% y/y respectively in March from -11.6% y/y and -2.8% y/y respectively in February. But capital goods continued to fall by 11.8% y/y from -15.0% y/y in February.

• Given the less exciting numbers in 1Q2019, we believe 1Q2019 GDP will likely register a weaker number compared with 4Q2018 of 4.7%. Our preliminary estimation suggests the GDP for 1Q2019 should hover between 3.8% and 4.2%. With a weak outlook for the 1Q2019 GDP data, noises that Bank Negara may cut the 3.25% OPR in the coming May MPC meeting have gained traction. However, we feel the central bank will most likely hold the rate in May and institute a rate cut in July.

Source: AmInvest Research - 6 May 2019