January Exports Up Further But Short of Expectations

January Exports Up Further But Short of Expectations

By Julia Goh & Loke Siew Ting Senior Economist & Economist UOB Bank julia.gohml@uob.com.my / jasrine.lokeST@uob.com.my

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Exports rose for the fifth month by 6.6% y/y in Jan 2021 (Dec 2020: +10.8%) but undershot our estimate (+8.0%) and Bloomberg consensus (+7.1%). Imports also gained further by 1.3% y/y (Dec: +1.6%), resulting in a narrower trade surplus of MYR16.6bn (Dec: +MYR20.7bn).

Jan’s export growth was solely driven by strong shipments of manufactured goods (Jan: +11.7%; Dec: +12.4%) particularly rubber products, E&E products, chemicals & chemical products, manufactures of metal, and optical & scientific equipment. This fully offset the weakness in both mining (Jan: -31.0%; Dec: -31.0%) and agriculture (Jan: -7.2%; Dec: +47.1%) exports. Robust demand was particularly coming from China, US, EU, Singapore, Hong Kong, and Vietnam.

Despite Malaysia reinstating Movement Control Order (2.0) in mid-Jan, it still managed to clinch the highest export value for the month of Jan on record. This further affirms our view that the export sector remains on track to recover in tandem with the global economy. The nation’s diversified export base and robust trade linkages also play an important role in sustaining the revival of the sector amid lingering uncertainties surrounding COVID-19 pandemic. We reiterate our export growth forecast of +4.0% for 2021 (2020: -1.4%).

Higher Exports of Manufactured Goods the Only Key Driver

Malaysia’s gross exports rose for the fifth month by 6.6% y/y in Jan 2021 (Dec 2020: +10.8%) but undershot our estimate (+8.0%) and Bloomberg consensus (+7.1%). On a m/m basis, exports contracted 6.4% (Dec: +13.1%), revealing one -off lumpy orders for palm-oil related products in particular in the preceding month.

Jan’s export growth was solely driven by strong shipments of manufactured goods (Jan: +11.7%; Dec: +12.4%) particularly rubbe r products (Jan: +187.4%; Dec: 126.9%), electrical & electronics (E&E) products (Jan: +13.1%; Dec: +18.1%), chemicals & chemical products (Jan: +10.6%; Dec: +0.9%), manufactures of metal (Jan: +19.9%; Dec: +34.9%), and optical & scientific equipment (Jan :

+9.9%; Dec: +4.6%). This fully offset the weakness in both mining (Jan: -31.0%; Dec: -31.0%) and agriculture (Jan: -7.2%; Dec: +47.1%) exports, with crude oil, LNG, and palm oil-related products shrinking 31.9%, 40.0%, and 10.9% respectively (Dec: -42.9%, -23.9%, and +66.9%).

Robust demand was particularly coming from China, US, EU, Singapore, Hong Kong, and Vietnam. Exports to China surged the most in four months by 26.0% (Dec: +13.5%), due to higher demand for E&E products, iron & steel products, as well as other manufactures especially solid-state storage devices (SSD). Overseas shipments to the US also maintained strong double-digit growth for the eighth consecutive month at 18.4% (Dec: +18.2%), underpinned by increased purchases of rubber products, wood products, as well as optical & scientific equipment. The continued upward momentum in exports to the EU (Jan: +11.4%; Dec: +14.4%) was mainly driven by robust demand for rubber products. Improved overseas sales to the two ASEAN countries – Singapore (Jan: +5.0%; Dec: +19.0%) and Vietnam (Jan: +52.8%; Dec: -8.3%) – were predominantly propelled by E&E products.

Imports Recorded Second Month of Gains

Imports also gained further by 1.3% y/y (Dec: +1.6%), lifted by increased imports of intermediate and consumption goods. Imports of intermediate goods rebounded for the first time in 10 months by 1.4% (Dec: -5.0%) as a result of higher imports of processed industrial supplies, particularly non-monetary gold. Imports of consumption goods rose 1.3% (Dec: +3.3%) due to increased imports of primary food and beverages, especially coffee, tea, spices. On the other hand, imports of capital goods continued its contraction for the seventh succeeding month by 5.4% (Dec: -2.1%), mainly due to reduced imports of electrical machinery, equipment and parts.

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