Malaysia's total trade experienced a significant YoY decline of 19.8% to RM213.01bn in August 2023. This contraction was more pronounced than the 14.5% YoY decline observed in the previous period. On a monthly basis, there was a slight improvement, with a reduced MoM decrease of 1.5%, compared to a 2.7% decline in July.
Meanwhile, Malaysia's trade surplus for the month stood at RM17.31bn. This figure represents a marginal decrease from the previous month's surplus of RM17.35bn, indicating a muted 0.1% YoY gain.
Breakdown showed total exports contracted 18.6% YoY during the month, lower than consensus expectations of -16.3% YoY. The absolute value of Malaysia's exports amounted to RM115.16bn, reflecting 1.4% decline (or reduction of RM1.65bn) from the previous month's RM116.81bn (July 2023: -5.8% MoM). Meanwhile, Malaysia's domestic exports witnessed a decline of 13.8% YoY, totalling almost RM92bn (+3.2% MoM), while reexports fell by 34% YoY, amounting RM23.18bn (-16.4% MoM).
Among the top ten destination countries, most recorded a contraction in demand with the exception of Australia and Vietnam.
Exports to China, valued at RM14.7bn and contributing 12.8% to Malaysia's total exports (making it the second-largest market), declined by 20.3% YoY. This was because of declining exports of Electrical and Electronic (E&E) products and other manufactured goods.
Similarly, exports to Singapore, accounting for 14.6% of total exports and valued at RM16.8bn, remained stagnant, registering a decrease of 19.3% YoY. This was due to reduced exports of E&E products and petroleum products.
By sector, all segments experienced a decline, with the agricultural sector leading the way with a significant contraction of -27.1% YoY. This was followed by a 23.1% decline in the mining sector and a 17.7% YoY decrease in the manufacturing sector.
A similar downward trend was observed in Malaysia's total imports, with a larger decline of 21.2% YoY to RM97.85bn, worse than July’s -16.11% (Consensus estimates: - 19% YoY). On a monthly basis, total imports declined by 1.6% from RM99.46bn in July 2023.
China remained as Malaysia's top source of imports, recording total imports of RM20.94bn, which accounted for a 21.1% share of Malaysia's imports. Nonetheless, China experienced a decrease of 17.5% annually.
Singapore followed as the second-largest source of imports with RM12.57bn (11.8% share) and increased marginally by 0.2% YoY. Looking at specific sectors, imports of mining, manufactured and agriculture goods fell by 37.7%, 19.5% and 14.4% YoY to RM8.07bn RM82.82bn, and RM5.41bn, respectively.
In the first eight months of 2023 (8M23), total exports decreased by 7.6% YoY to RM935.22bn, while imports were valued at RM782.29bn, marking an 8.6% decrease from the previous year. Consequently, the trade balance for the first eight months of the year stood at RM152.92bn, showing a YoY decline of 2.0%. The total trade for the month amounted to RM1.72tn, representing an 8.1% YoY decrease.
Despite contractions in both exports and imports, the trade surplus exhibited an average growth of 4.6% YoY in the second month of the third quarter. This performance is relatively better than the figure recorded in the second quarter (2Q), which was at -9.2% YoY. If Malaysia continues to maintain a favourable surplus in the coming months, it could contribute to supporting GDP performance by mitigating the impact of a high base effect in the third quarter of 2023.
We believe that there is room for improvement in Malaysia's trade outlook in coming months. For instance, in a surprising turn of events, a private survey of China's manufacturing activity in August showed unexpected expansion. The Caixin Manufacturing Purchasing Managers Index (PMI) climbed to 51, marking its highest reading since February and surpassing economists' estimates. This data adds to the growing evidence that targeted policies aimed at bolstering the Chinese economy may be having a positive impact. It also coincided with Beijing's concerted efforts to support the property market. Moreover, the latest data showed that China's industrial output and retail sales grew at a faster-than-expected pace in August. The upbeat data suggest that a flurry of recent measures including property support policies to shore up a faltering economic recovery are starting to bear fruit.
However, it's important to exercise caution. While China's figures suggest an improvement in August compared to the previous month's slump, it remains uncertain whether this improvement is sustainable. Policymakers have implemented only partial measures, and overall confidence in the economic recovery remains fragile.
Regarding Malaysia, the latest PMI data (47.8) indicates that demand conditions in the country manufacturing sector remained subdued in August. However, these data points are still in line with modest growth when compared to official statistics. Most manufacturers in Malaysia are optimistic, hoping that new orders will rebound, which supports their confidence that production will increase in the coming 12 months.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....