Malaysia records highest monthly trade surplus in October

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KUALA LUMPUR (Dec 4): Malaysia recorded the highest monthly trade surplus of RM17.3 billion in October despite weakening trade flows, an investment bank said.

MIDF Amanah Investment Bank in a research note today said exports, down 6.7 percent year-on-year (Y-o-Y), was compensated by the harder decline in imports which contracted 8.7 percent Y-o-Y.

“Exports to the world’s two largest economies kept deteriorating. Malaysia’s export to China kept falling for the third straight month and recorded a double digit fall in October,” it said.

In a similar note, it said exports to the US, although still positive, have consistently moderated since June this year.

“This demonstrates the direct impact from the US-China trade dispute,” it said.

It said in addition, sales to most of the major ASEAN countries also fell during the month.

“For instance, exports to Thailand recorded a more than seven-year low, declining 18.2 percent Y-o-Y, due to low sales of electrical and electronics products and crude petroleum,” it said.

The investment bank said for the January-October period, export growth averaged at negative 1.8 percent Y-o-Y.

“In terms of absolute value, the monthly average of 2019 so far recorded at RM81.9 billion which is still lower than the RM83.7 billion in 2018,” it said.

It said the continuous decline in imports of capital and intermediate goods also indicated weak prospects for future exports.

“With faltering trade globally derived from rising protectionism and loss of momentum in some major economies, especially in Europe, we do not foresee a huge comeback in the second half of this year,” it said.

UOB Malaysia, in a separate note, said Malaysia’s export outlook for the remaining two months of 2019 and for 2020 remained cautious, given the ongoing uncertainties surrounding the US-China trade talks.

“We maintain our full-year export forecast at a contraction of one percent for 2019, before recovering to growth of two percent in 2020,” it said.

It said the projected recovery next year is expected to be softer relative to past cycles amid the prolonged US-China trade dispute, potential widening of the trade spat to other countries and global tech down cycle that may drag until mid-2020.

Furthermore, it said recent news flow has deflated trade optimism of a “Phase 1” US-China trade deal with US President Donald Trump signing the Hong Kong Human Rights and Democracy Act on Nov 27 and the US House of Representatives passing the Xinjiang Bill on Dec 3.

“Trump also hinted that he may prefer waiting until after the US presidential election (on Nov 3, 2020) to sign a deal with China, while US Commerce Secretary Wilbur Ross said the US will go ahead with its plan to impose an additional 15 percent tariff on US$160 billion worth of Chinese products if no breakthrough deal comes before mid-December,” it said.

It said China’s Government, in return, has insisted on a rollback of US tariffs as part of any “Phase 1” trade deal but US officials were said to have resisted such a demand.