Trade rebound point to ‘better’ 3Q GDP


MALAYSIA’S total trade in September rebounded by 5.5% year-on-year (YoY) to RM155.88 billion from last year, is supportive of a “better” third quarter (3Q) GDP after the -17.1% slump recorded in 2Q.

Maybank Investment Bank Bhd’s (Maybank IB Research) team of analysts, led by regional head of research Suhaimi Ilias, expect 3Q GDP to shrink by a shallower -3.5% pending releases of more key economic indicators for Sept 2020.

According to a Bloomberg survey median forecast, Malaysia’s GDP will likely post a negative growth of -4.3% in the July-September period from a year earlier.

The latest trade figures released on Wednesday showed a rebound in exports, which grew 13.6% YoY to RM88.93 billion, following increases in trade with China, Hong Kong, the US, the Netherlands and Taiwan. The figure marked the highest export value ever recorded for the month.

Imports in September, however, declined 3.6% to RM66.96 billion.

For the first nine months of 2020, exports fell 3.7% from a year earlier to RM709.6 billion, while imports contracted 6.9% to RM584.6 billion. Compared to August, exports, imports, total trade and trade balance recorded an increase of 12.4%, 1.6%, 7.5% and 66.3% respectively.

Economists, however, have maintained that exports will remain at a contraction in 2020. CGS-CIMB Research has kept its -2% gross exports forecast for the year.

Its economists, Michelle Chia and Lim Yee Ping, said the sharp improvement in exports in September was heavily concentrated in manufacturing (17.5% YoY) — primarily electrical and electronic (E&E), gloves and iron and steel — while palm oil also contributed to the surge in agriculture exports (26.6% YoY).

They added that the global surge in Covid-19 infections over the last month provides further support to exports of rubber products by 115.8%, while palm oil exports rose by 43.6% as the production season reaches its peak, coinciding with restocking activities by China and the European Union.

Additionally, the stockpiling by China ahead of the US ban on tech exports on Sept 15 had also likely boosted Malaysia’s E&E exports by 33% in September.

On the Overnight Policy Rate, CGS-CIMB is expecting a 25 basis points rate cut at Bank Negara Malaysia’s next Monetary Policy Committee meeting on Nov 3 to provide further monetary stimulus.

On prospects, United Overseas Bank (M) Bhd economists Julia Goh and Loke Siew Ting are expecting export figures to remain uneven amid the resurgence of Covid-19 infections across major developed countries, and in Malaysia.

UOB Malaysia has reaffirmed its full-year export projection for 2020 at a 3.5% contraction, partly helped by low year-ago base effects.