PETALING JAYA: The subdued global trade and industrial performance in October along with high-base effects from 2018 will see Malaysia’s imports contract by 6.8% and exports by 8.2% from a year ago.
RAM Ratings expects the contraction in both imports and exports to result in a trade surplus of RM14.4bil when the government releases the trade data today.
A Bloomberg survey expects a 7% decline in imports and a 12.3% contraction in exports for October.
RAM said the fruition of a preliminary US-China “phase one” deal was unlikely to spark an immediate revival in trade momentum as businesses would likely remain wary of the uncertainties looming over subsequent phases.
Additionally, the recent signing of a legislation supporting protesters in Hong Kong by the US may complicate future trade negotiations.
“Given past flip-flops on both sides, more progress will be needed to revive business optimism and, consequently, any notable rebound in global demand, ” it said.
In September, exports contracted by 6.8% on-year yoy, the sharpest decline since October 2016. That was the second consecutive month of negative growth due to weak performances in all major sectors. Imports however rose by 2.4%.
RAM pointed out the first phase of the US-China trade deal was also unlikely to reverse any realignment in supply chains arising from the dispute.
Largely induced by the US’s more prohibitive trade barriers against China, major Asian exporters of electrical and electronic (E&E) goods experienced a marked decline in their share of overall E&E exports to China.
As a consequence, regional distribution patterns have changed as producers have been trying to circumvent such barriers.
While some economies such as Taiwan have gone on to exporting directly to the US, some producers like South Korea and Malaysia have diverted their supplies to new production hubs in Vietnam and Taiwan.
Despite 2019 being a weak year for the semiconductor sector, recent shipment trends have shown signs that the pace of the decline may have bottomed out.
RAM’s head of research Kristina Fong said there are some bright spots for the E&E sector, including falling inventory-to-shipment ratios for major regional tech exporters and also a gradual pick-up in orders.
“The rollout of new products in the tech space – such as those related to 5G and the Internet of Things – could also lend some support to this sector, ”
“All these factors should shore up the resilience of the E&E sector, a key export for Malaysia, ” she added.
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