Malaysia exports declined 8.6% in October

Exports could turn around in 1Q 2017.

October exports missed expectations to contract 8.6% y/y (-3.0% in September) amid a high base effect (+16.7% in Oct 2015). Moving forward, UOB projects exports to turn around in 1Q 2017 amid low base effects and steady commodity prices.

"Combined with positive revaluation effects from the weaker Ringgit should cushion the merchandise trade surplus and current account," it said.

Here's more from UOB:

Compared to the previous month, exports declined by 1.1% seasonally adjusted. Breakdown of key sectors. Both manufactured exports fell 6.0% and commodity exports declined 20.4%. Components that recorded expansions were electrical and electronics (+1.2%; share 38.4%) and palm oil (3.7%; share 6.7%).

Components that contracted include crude petroleum (-27.9%; share2.5%), chemicals (-4.7%; share 7.3%), LNG (-40.2%; share 3.9%), refined petroleum products (-7.4%; share 7.3%); machinery and appliances (-19.8%; share 4.2%); rubber products (-1.1%; share 2.5%); optical and scientific equipment (-5.0%; share 3.7%); metal (-43.8%;
share 3.6%).

Overall exports to G3 fell 14.6% y/y due to decline in exports to Japan (-29.1%; share 9.1%), US (-3.5%; share 9.1%), and EU (-12%; share 10.4%). One positive is exports to China turned around to +3.4% (share 12.1%) marking first increase in
seven months while exports to Hong Kong grew 14.5% (share 3.8%). However exports to other parts of Asia (excluding China) fell a larger 10.2% (share 50.5%).

Exports to ASEAN4 fell 5.1% (share: 25%) amid declines in exports to Singapore (-7.5%; share 13.9%) and Thailand (-8.9%; share 5.4%). This was offset by higher exports to Philippines (8.5%; share 1.8%) and Indonesia (5.4%; share 3.3%).

Exports to CLMV grew 29% (share 3.6%) thanks to strong exports to Cambodia (30.4%), Laos (30.5%), Myanmar (57.8%), and Vietnam (24.4%).

Malaysia’s weak exports was in line with export declines in China (-7.4% in Oct), Japan (-10.3% in Oct), Korea (-3.2% in Oct; +2.7% in Nov), and Singapore (-9.2% in Oct). Taiwan was an outlier with +5.3%.

Currency and revaluation effect. Compared to the previous month, revaluation effects on trade were smaller as average USD/

MYR declined by narrower 1.5% to 4.17 in October (-2.1% to 4.11 in September). November export levels should be lifted by larger revaluation effects when USD/MYR fell 3.8% to 4.34 last month.

Global trade and exports are in positive territory. Purchasing Manager Indices (PMI) signal firmer manufacturing expansions across G3 and China. However this has not translated into meaningful gains for Malaysia’s exports with both volumes and unit prices still declining.

Global semiconductor sales recorded its second month of growth in September. However US semi book-to-bill ratio eased below 1.00 in October indicating lower orders received relative to products billed though this could be due to seasonal and event driven effects ahead of US elections.