Upside for M’sia limited despite better China trade data

UOB Research’s senior economist Julia Goh noted that China’s trade data had come in better than the research house had expected, in line with the improvements in March PMI and indications of work resumption.

PETALING JAYA: Despite Chinese trade data in March coming in above market expectations, economists say they are not optimistic that Malaysia will see much upside.

This, they said, was because there was no guarantee of continued improvement in China’s trade, especially given the continued lockdowns in major cities across the globe.

China has largely managed to bring the Covid-19 pandemic under control in the country, following the outbreak that began late last year, and most of the country’s workforce has reportedly returned to work, and travel restrictions eased.

This led to its trade data for March beating expectations, with exports falling 6.6% against an expected 14% plunge, while imports fell 0.9% compared with expectations for a 9.5% drop.

Fitch Solutions’ senior country risk analyst Darren Tay told StarBiz that the better trade data from China was unlikely to be sustained over the coming months as the global economy was still set to slip into a sharp contraction.

This, he said, was due to the lockdowns that have been imposed in developed economies such as the US and Western Europe.

“Therefore, the prospects for sustained upside to Malaysia’s exports are similarly limited.

“Domestically, economic output has also been curtailed by containment measures and there is also the risk of the Movement Control Order being extended for an even longer period of time, such that even if global situation were to significantly improve, Malaysia may find it difficult to ramp up production to meet demand, ” he said.

UOB Research’s senior economist Julia Goh noted that China’s trade data had come in better than the research house had expected, in line with the improvements in March PMI and indications of work resumption.

“However, there is no guarantee of continued improvement as other parts of the world are in lockdown in April, ” she said.

Malaysia, she added, was not likely to get a boost from the improvement in China’s trade, because while the resumption of China’s operations would ease some of the earlier supply disruptions, Malaysia and other countries have already halted non-essential activities in April.

Earlier this year, China had reported combined trade data for the months of January and February, which saw exports fall drastically by 17.2% from a year ago, while imports slipped 4%.

Affin Hwang Capital Research chief economist Alan Tan told StarBiz that while the latest data from China was better than expected, the country’s overseas orders remained weak.

He noted that China’s shipments to the US, EU and Canada declined sharply during the month.

Tan said they expected China’s domestic demand and exports will remain weak in 1H2020, reflecting the cautious view by the International Monetary Fund (IMF).

“We continue to expect supply disruptions in China in late January and February to disrupt global supply chains within and outside China, especially in 1H2020, ” he said.

Socio-Economic Research Centre executive director Lee Heng Guie(pic above) concurred, saying the global export outlook remained bleak,

“The partial and restricted lockdown would not only disrupt the global supply chains but also sap consumer demand except for the medical and healthcare-related products and equipment which continue to see good demand, ” he said.