Flash Notes-Malaysia: Strong June Trade Data But Ringgit Unchanged

Exports leaped 5% y/y in June (-6.7% in May) contrary to ours (-2.8%) and Bloomberg market consensus (-2.2%). Compared to the previous month on a seasonally adjusted basis, exports rose 6.2%. Given that exports are reported in Ringgit terms, the higher growth could be inflated by the weaker currency.

    The surprise jump was due to strong shipments in electrical and electronics (E&E) of 13.5%, metal (68.3%), palm oil (21.6%), chemicals (15.1%) and machinery appliances (12.4%). The negatives were exports of LNG (-45.2%) mainly due to a drag from the 42% decline in prices, refined petroleum products (-27.6%) and crude petroleum (-34%).

    The overall gain in exports was driven mainly by volume of exports (4.6%) while export prices increased 0.4%.

    By country, Malaysia recorded the strongest growth in exports to China (49% y/y), EU (15.6%), Thailand (12%), US (9.5%) and Singapore (3.8%). Exports to the ASEAN region rose 6.4%.

    Meanwhile imports fell by narrower 1.5% (-7.2% in May) mainly attributed to decline in imports of intermediate goods (-2.4%) and capital goods (-16.5%). Imports of consumption goods reported another month of strong growth (+36.8%) owing to strong purchases of semi-durables (+121.8%), foods and beverages for household consumption (+18.2%) and non-durable items (+30.4%).

    The trade surplus widened to MYR8bn (+MYR5.5bn in May) beating expectations for MYR5.5bn surplus. Year-to-date the trade surplus recorded RM41.7bn (vs. RM44.8bn in Jan-Jun 2014). The sustained trade surplus reaffirms our view that the current account will remain in surplus this year.

    Exports fell 3.1% in first half of this year. We expect some improvement in export shipments in the coming months amid gradual recovery in global semiconductor sales, moderate growth in the US manufacturing sector, and stabilization in the Chinese economy. We project full year exports to decline 1.5% (+6.4% in 2014).