• Exports jumped 12.3% YoY in July 2024, outpace market consensus 9.0%.

• Trade surplus the smallest since COVID-19 pandemic.

• Imports grew by 25.4% YoY, the highest in 21 months.

• Agriculture exports almost at 2 years high.

• Solid rebound for manufacturing exports.

• Positive leading indication by capital goods imports. ​​​​​​

OVERVIEW

Malaysia’s export growth beat market expectations. Exports jumped 12.3% YoY in July 2024, outpace market consensus 9.0%. This is the fastest pace since December 2022. Domestic exports which represent 80.0% of the outbound shipments was the main driver, surging by 18.0% whereas re-exports recorded the smallest contraction rate 5.8% YoY in 4 months.

Trade surplus the smallest since Covid-19 pandemic. Despite of strong export growth, the growth of inbound shipments still robust. Imports grew by 25.4% YoY, the highest in 21 months and registering 5 straight months of double-digit expansion rate. Hence, the size of trade surplus moderated to RM6.4bn which is the lowest since April 2020.

As of 7M 2024, total exports increased by 5.1% (2023: -8.0%) and imports surged by 15.5% (2023: -6.4%). The pick-up of exports is mainly supported by the three sectors namely agriculture (7M24: 8.3%), manufacturing (7M24: 4.8%) and mining (7M24: 5.2%). Among others thanks to recovery of global demand, upcycle of tech sector, and stabilisation of global commodity prices. For imports, upbeat domestic economic activities are causing the inbound shipments to soar amid resilient consumer demand, active construction jobs and upcycle of tech sector.

Exports growth of agriculture almost at 2 years high. Thanks to palm oil exports, agriculture sector recorded 32.8% YoY in July 2024. This is the fastest pace since September 2022. Palm oil oversea sales jumped by 36.3% YoY, followed with natural rubber by 17.6% and saw log by 8.4%.

Solid rebound for manufacturing exports. The oversea sales of manufacturing output improved strongly by 10.6% YoY, partly due to rebound of E&E and petroleum products exports growth. Other than that, certain subsectors recorded strong double-digit pace such as machinery, equipment & parts, processed food and rubber products.

Mining exports on steady momentum. Thanks to stable Brent crude oil price, exports of mining remain steady recording 10.2% YoY. The growth would have been higher if crude petroleum not in contraction. LNG exports continue to support the mining export growth.

Exports to USA strengthened while to China still sluggish. Malaysia’s exports to USA jumped to almost 2 years high at 30.9% YoY in July 2024. Solid turnaround to EU, Japan, and Singapore. However, oversea sales to China still weak recording a double-digit dip in July 2024. The still weaken domestic demand of China could be the dragging factor, which in line with unstable China’s overall import growth. As for India, the robust export growth is in tandem with the expansion of palm oil outbound shipments.

Positive leading indication by capital goods imports. Excluding re-exports, retained imports grew steadily by 37.5% YoY. All major components increased strongly above 20% level. Most notably, capital goods imports growth which recorded fastest growth in 4 months, indicate further expansion of local economic activities especially those related with high-capital investments. The higher growth in the imports of capital goods is attributed by non-transport equipment which potentially associated with projects such as data centres, civil engineering and residentials. Expansion of intermediate goods imports also indicate for continuous expansion of manufacturing and exports activities in the near term. With appreciation of USDMYR, we foresee consumption goods to stay in solid momentum on top of stable job market and supportive economic policies as well as EPF Flexible Account withdrawal.

Broad-based recovery to continue. July 2024 saw continuous broad-based recovery of export growth for key countries. ASEAN economies recorded betterment of export growth among others Singapore, Vietnam and Indonesia. China’s exports recorded at 6.7% YoY, the third consecutive months of growth. With the prospect of easing monetary policy in developed markets, we foresee continuous pick-up of exports in 2H 2024. Also, stable global commodity prices and upcycle of tech sector will support the export growth.

We keep exports growth forecast at 6.2% for 2024. Moving into 2H 2024, we foresee Malaysia’s exports growth to improve stronger from 5.1% YoY in 7M24. Monetary policy easing in developed markets, upcycle of tech sector, and supportive global commodity prices are among upside factors for Malaysia’s exports performance in 2H 2024. On a flip side, weaker-than-expected China’s economic recovery and postponement of interest rate cuts by the Fed may derail global trade activities in 2H 2024.

Source: BIMB Securities Research - 20 Aug 2024