Economic Viewpoint

8 August 2016
Economics
Kenanga Investment Bank Berhad
chanqm@kenanga.com.my
T: 603-21649080 ext. 8337

Malaysia External Trade

June exports unexpectedly rises 3.4% YoY
OVERVIEW
Total export receipts for June turned out much
higher than the market expected, rising by 3.4%
YoY compared to the consensus estimate of a

Graph 1: Malaysias External Trade Growth Trend (3MMA)

YoY

Trade balance (RHS)

20%

Imports

RM bil
12

Exports

3.7% YoY decline. During the same month,

imports rose 8.3% YoY, also growing by more

15%

than the market expected. The trade balance

10%

5%

receipts was due to the resilience of electrical &

0%

electronics (E&E) exports despite reduced global

-5%

-3

widened to RM5.5b from RM3.3b in the previous

month. The unexpected increase in exports

appetite for semiconductor and related products.

E&E exports in June rose 4.9% YoY (May: 3.2%).
Consequently the share of E&E exports to total
exports increased to a nine-month high of 36.5%.

-10%
Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

-6
Jun-16

Note: Data points show 3-month moving average

Source: Department of Statistics, Kenanga Research

Commodity exports were down 20.1% YoY and accounted for a severely reduced 12.0% of total exports,
down from over 20.0% of total exports before the mid-2014 commodity price crash. By import category,
capital goods imports increased 12.8% YoY in June, but for 1H16 still remained down 1.9% YoY.
Intermediate imports rose by 5.7% YoY, turning around from big declines earlier in the year. Consumption
imports grew at much slower rate of 1.8% YoY after 14 months of double-digit growth. Looking forward,
current trends suggest modest export growth in the coming months.. Exports grew just 1.2% YoY in 1H16
and at the current growth trajectory, exports will face a challenging 2H16, due to a higher base for
comparison. We therefore lower our full-year 2016 export growth forecast to 1.9% from 2.9% previously
and note that downside risks have been increasing.

June exports increased 3.4% YoY, bettering the consensus estimate of a 3.7% decrease and the house estimate of a
1.4% decrease. The unexpected result compares with the May decrease of 0.9% YoY and the April gain of 1.6% YoY.

On a MoM basis, the total value of exports rose by 10.9%. June was only the second month in 1H16 that exports increased
on a MoM basis. All other months saw a MoM decrease. After adjustment for seasonal factors, the MoM change in exports
in June was a 10.6% increase.

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Economic Viewpoint

8 August 2016

During 1H16 or the first half of the year, exports

Graph 2: Electrical & Electronics Export Growth Trend

expanded by 1.2% YoY on average, which compares

well with the 3.1% YoY decline in the same period last

% YoY

year. However, the rate of growth in 1H16 is below

80

Global Semiconductor Shipments: USD

E&E Export Growth: MYR
E&E Share of Total Exports (RHS)

%
45

market expectations.

60

40

40

35

local currency 8.5% YoY lower against the US dollar

20

30

compared to 11.0% in May and 6.9% YoY lower in April.

25

By category, E&E exports in June were up 4.9% YoY

-20

20

The ringgit weakened in June from the previous month.

The published USDMYR rate averaged 4.0871, with the

(May: 3.2%), performing especially well despite reduced

-40
Jun-08

global appetite for semiconductor and related products.

Consequently, the share of electrical & electronics (E&E)

Jun-10

Jun-12

Jun-14

15
Jun-16

Source: Dept. of Statistics, SIA, CEIC, Kenanga Research

exports to total exports increased to a nine-month high

of 36.5%.

Commodity exports in June were down 20.1% YoY (May: 20.2% YoY) as crude petroleum and natural gas export prices
continue to be affected by low prices in international markets.

June imports unexpectedly rose 8.3% YoY, after a 3.1% YoY increase in May. Consensus and house estimates were
expecting imports to decline by 0.4% and rise by 1.4% respectively. On a MoM basis, imports increased by 7.5%. After
seasonal adjustment the MoM change was an 8.1% expansion.

The

growth

in consumption

imports

has slowed

significantly to just 1.8% YoY after 14 months of doubledigit growth fuelled by ringgit depreciation.

Imports of intermediate goods in June rose by 5.7%

Graph 3: Imports Growth Trend by Category (3MMA)

YoY
40%

Intermediate

Capital

Consumption

30%

YoY, turning around from big declines earlier in the year.

However the share of intermediate goods imports to total
imports remains small at 56.9% compared to over 60.0%

20%

10%

in 2012. Imports of capital goods increased 12.8% YoY

in June, but for 1H16 still remained down by 1.9% YoY.

The trade surplus for June widened to RM5.5b from a

19-month low of RM3.3b in May. The 1H16 trade surplus
was a healthy RM41.8b, slightly higher than RM41.7b in
the same period last year.

0%
-10%
-20%
Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Note: Data points show 3-month moving average

Source: Dept. of Statistics, CEIC, Kenanga Research

Total trade in June rose 5.7% YoY after rising 1.0% YoY in May. In 1H16, total trade is up 1.3% YoY compared to a
contraction of 2.8% in the same period a year ago.

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Economic Viewpoint

8 August 2016

By major export destination, shipments to the United States surged 22.0% YoY (10.6% share) and EU was up 4.1% YoY
(9.9% share of total exports). Meanwhile, exports to Japan rose 2.4% YoY (7.4% share). Exports to ASEAN rose 8.5% YoY
(30.1% share) but exports to China fell 20.3% (11.6% share).

OUTLOOK

Export performance in 1H16 has been disappointing

considering a low-base effect was into play. The modest

Graph 4: Major Export Destinations (% share, 3MMA)

30%

recovery expected in 2Q16 did not materialise and it

appears there is little optimism for an uptrend in

25%

shipments of Malaysian goods.

E&E exports which made up a sizable 36.3% share of

total exports in June will continue to experience modest
growth over the coming months as the sector has proven

ASEAN

China

Japan

USA

EU

20%

15%

to be resilient to the downtrend in the global market for

E&E products.

Looking forward, current trends suggest modest export

growth in the coming months. At the current growth
trajectory; exports will face a challenging 2H16, due to a
higher base for comparison.

10%

5%
Jun-06

Jun-08

Jun-10

Jun-12

Jun-14

Jun-16

Note: Data points show 3-month moving average

Source: Dept. of Statistics, CEIC, Kenanga Research

We therefore lower our full-year 2016 export growth forecast to 1.9% from 2.9% previously and note that downside risks
have been increasing.

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Economic Viewpoint

8 August 2016

Table 1: Malaysia External Trade Growth Trend

2014

2015

Jun
-15

Jan
-16

Feb
-16

Mar
-16

Apr
-16

May
-16

Jun
-16

1H15

1H16

Total Trade

%YoY

5.8

1.2

1.9

0.1

4.2

-2.5

-0.2

1.0

5.7

-2.8

1.3

Trade Balance

RM bil

82.5

94.6

8.0

5.4

7.4

11.2

9.1

3.3

5.5

41.7

41.8

Exports

%YoY

6.3

1.9

5.0

-2.8

6.7

0.2

1.6

-0.9

3.4

-3.1

1.2

6.3

-9.4

-8.3

17.4

-7.9

-2.3

10.9

%MoM
E&E

Commodities

Others

Imports

%YoY

8.1

8.5

13.5

2.6

8.9

0.4

2.1

3.2

4.9

4.9

3.5

Shr

33.5

35.6

36.0

36.1

35.4

36.2

35.0

36.3

36.5

35.2

36.0

%YoY

2.7

-17.4

-19.9

-31.0

-17.8

-21.4

-17.0

-20.2

-20.1

-19.6

-21.8

Shr

19.7

16.0

15.5

14.1

14.3

13.3

12.0

12.4

12.0

16.8

13.0

%YoY

6.6

5.3

9.8

5.6

14.7

7.8

6.7

2.3

9.8

-1.5

7.6

Shr

46.8

48.4

48.5

49.7

50.3

50.5

53.0

51.3

51.5

48.0

51.1

%YoY

5.3

0.4

-1.5

3.3

1.6

-5.5

-2.3

3.1

8.3

-2.6

1.4

2.4

-6.0

-12.6

12.2

-5.6

8.4

7.5

%MoM
Capital

Intermediate

Consumption

%YoY

-2.2

-0.2

-16.7

-13.2

0.4

-22.2

0.0

17.2

12.8

-2.7

-1.9

Shr

14.1

14.0

12.9

12.6

14.0

13.4

13.4

16.4

13.4

14.3

13.9

%YoY

7.6

-2.3

-2.3

5.1

-6.3

-8.3

-6.8

-0.2

5.7

-0.9

-1.7

Shr

59.8

58.2

58.3

61.5

55.7

57.0

56.8

55.8

56.9

59.2

57.3

%YoY

5.7

24.1

36.9

33.1

17.9

21.9

15.3

13.6

1.8

15.2

16.4

Shr

7.4

9.1

10.3

10.3

9.3

9.6

10.7

10.8

9.7

8.8

10.1

Source: Dept. of Statistics, CEIC, Kenanga Research, Shr. = share to total exports or imports, E&E = Electrical & Electronic products

This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make
any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the
information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank
Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer
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Published and printed by:
KENANGA INVESTMENT BANK BERHAD (15678-H)
8th Floor, Kenanga International, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia
Telephone: (603) 2166 6822 Facsimile: (603) 2166 6823 Website: www.kenanga.com.my

PP7004/02/2013(031762)

Chan Ken Yew

Head of Research

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