Malaysia: Exports contracted once again in September – UOB

Gross exports deteriorated further for the seventh consecutive month but at a slower pace of 13.7% y/y in Sep (Aug: -18.7%). It marked the longest declining streak since late 2008. However, the reading came in better than our estimate (-18.0%) and Bloomberg consensus (-16.5%). Import contraction almost halved to 11.1% last month (UOB est: -11.5% vs Bloomberg est: -12.1%, Aug: -21.2%). Trade surplus widened to MYR24.5bn (from +MYR17.2bn in Aug). 

In 3Q23, both exports and imports maintained a double-digit decline for the second straight quarter at 15.2% y/y and 16.3% y/y respectively (2Q23: -11.1% and -11.5%), leaving a cumulative trade surplus of MYR59.1bn (2Q23: +MYR53.9bn). This is expected to translate into a larger current account surplus of MYR12.0bn (vs +MYR9.1bn in 2Q23). Actual 3Q23 current account data will be released on 17 Nov, together with the 3Q23 GDP numbers.

We maintain our full-year export outlook at -9.0% for 2023 (MOF est: -7.8%, 2022: +24.9%) and +3.5% for 2024 (MOF est: +5.1%) as there is still a lack of catalysts for trade in the near term. The recent Israel-Hamas conflicts occurred since 7 Oct may renew oil crisis and adverse impact on tech sector as market fears that the conflict will grow into larger Middle East war, while the RussiaUkraine war remains unresolved. Increasing expectations of higher-for-longer global interest rate environment and persistent property sector woes in China will likely to hinder a strong rebound in world demand and in turn delaying an upturn in global tech cycle entering 2024. That said, base effects, trade regionalization and price earnings conversion may provide some support to the trade outlook in 2024, amid an expected soft landing in the global economy.