Friday 29 Mar 2024
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KUALA LUMPUR (Jan 7): This year should have been much better for exporters, coming from a sluggish 2016, which is expected to see exports grow only 0.5% year on year, according to the latest edition of the Edge weekly.

In its cover story, the Edge’s Ben Shane Lim wrote that the ringgit continues to flirt with new record lows, briefly surpassing the psychological 4.50 level against the US dollar last week.

Even though other emerging market currencies have depreciated as well, the ringgit continues to be one of the worst performers against the US dollar, giving Malaysian exporters a competitive advantage, said the magazine.

Meanwhile, it said the US economic growth forecasts have risen to bullish levels that have not been seen during the global financial crisis in 2008.

In fact, growth estimates for global gross domestic product have been revised upwards although China and Europe’s GDP growth are expected to moderate slightly, said the Edge.

The weekly pointed out that in its most recent Global Economic report, HSBC upgraded its global growth forecast from 2.3% to 2.5%. It estimates that global GDP expanded 2.2% last year. The bottom line is that external demand should, at the very least, remain intact this year.

It said stronger commodity prices, particularly crude oil and crude palm oil, will also lend support to export numbers this year.

On top of that, domestic-focused stocks are expected to face more volatility as the 14th general election is expected to be held this year.

Put together, these factors should result in a robust year for exporters as well as the corresponding stocks.

“Malaysia’s exports grew at a relatively muted 0.5% y-o-y in 2016. But this year, we are forecasting it to grow 2%,” the Edge quoted an economist at RHB Research as saying.

However, the magazine said his forecast is relatively conservative.

It said the consensus estimate for export growth this year is 2.8% and the latest export numbers do give some hope for a rebound.

The weekly said data for November released last Friday shows continued signs of recovery for exports. During the month, exports rose 7.79% y-o-y to RM72.83 billion, the quickest pace in 2016. More importantly, the recovery in gross exports was not driven by stronger commodity prices alone. Electrical and electronic (E&E) exports rose 13.2% y-o-y to RM26.2 billion. Note that E&E exports, comprising semiconductors primarily, make up 35.9% of total exports.

That said, higher commodity prices also gave gross exports a boost during the month. Exports of palm oil and palm-based products rose 24.3% y-o-y to RM6.6 billion, due primarily to higher average unit prices, said the weekly.

For more insight into what lays ahead for exporters, read the cover story of the Edge for the week of Jan 9 – Jan 15 available at newsstands now.

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