Malaysia: outlook on exports looks cautious – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assessed the recently published trade data for the Malaysian economy.

Key Quotes

“Gross exports fell by 6.7% y/y in Oct, which was similar to the contraction in the previous month. However, the decline in Oct was smaller than ours (-14.8%) and market (-12.3%) estimates. Gross imports reverted to a decline of 8.7% y/y in Oct (Sep: +2.4% y/y), resulting in a new record high for trade surplus of MYR17.3bn in Oct (Sep: + MYR8.4bn in Sep).”

“Noteworthy is a sharp month-on-month gain in Oct’s exports, +MYR12.9bn or 16.6% m/m, which could be attributed to 1) potential front-load of purchases ahead of the 15 Dec US tariffs on USD160bn worth of Chinese products, and 2) normalisation of activity after the shorter working month in Sep.”

“We remain cautious on the export outlook for the remaining two months of 2019 and 2020 given ongoing uncertainties surrounding US-China trade talks. We maintain our full-year export forecast at -1.0% for 2019, before recovering to 2.0% growth in 2020. The projected recovery next year is expected to be softer relative to past cycles amid the prolonged US-China trade disputes, potential widening of trade disputes to other countries, and global tech down cycle that may drag until mid-2020”.