January External Trade

In line with global trends, both exports and imports surged 37.0% and 31.0% y-o-y on the back of higher demand ahead of the Chinese New Year and the low base effect in Jan ’09. Despite the encouraging y-o-y growth, we have yet to see a convincing pick-up in economic activities on a monthly basis as exports and imports were down 4.1% and 7.2% respectively m-o-m. The fact that capital goods declined both (-2.9%) y-o-y and m-o-m (-20.7%) may also indicate that businesses are still reluctant to invest in factories, machinery and equipment to ramp up production levels. Across major export markets, US and Japan rebounded y-o-y from negative territory, which may drive Malaysia’s exports going forward. With the implementation of AFTA from January 2010, we believe Malaysia will rely more on intraregional trade to boost exports.

External trade surged y-o-y. Exports beat market expectations for a 31.3% increase by surging 37% y-o-y for Jan ’10, largely due the low base effect in 2009 and the global economic recovery gaining ground. Ahead of the Chinese New Year, the increase in exports was mainly due to higher demand for electrical & electronics (+55.6%), chemical & chemicals (+50.0%) and refined petroleum products (+60.4%). In tandem with the double digit exports growth, imports also surged by 31.0% y-o-y although it was slightly below market expectation of a 32.0% increase. The y-o-y surge in imports was mainly attributed to intermediate goods (+36.7%) and consumption goods (+19.7%) while capital goods dipped 2.9%. Despite the encouraging y-o-y growth, we have yet to see a convincing pick-up in economic activities on a monthly basis. both exports and imports were down m-o-m by 4.1% and 7.2% respectively. We may need to see a more convincing m-o-m growth in the next few months to conclude that the economy is on track to a sustainable recovery. The fact that capital goods fell both (-2.9%) y-o-y and m-o-m ( 20.7%) may also indicate that businesses are still reluctant to invest in factories, machinery and equipment to raise production levels. The total trade surplus for Jan ’10 stood at RM12.9bn, which was the 147th consecutive month of trade surplus.