Malaysia posts weak exports, but stable trade surplus

Malaysia's trade surplus was rangebound in April, at MYR6.9bn. Exports slumped at the margin, falling 8.8% y/y, worse than market was expecting. The decline comes amid ongoing pass-through of lower crude oil prices into LNG prices and some softness in non-energy exports given weak global demand. For instance, LNG exports were down 40% y/y, refined petroleum exports were down 36.6% y/y and palm oil exports were down ~20% y/y, notes Barclays. A mitigating factor was relative strength in machinery (10.7% y/y) and metal exports (17.7% y/y), which helped support overall export momentum.

"Q2 is seen as the quarter when the impact of lower oil prices into trade balance is likely to be fully factored. But given improvement in underlying volume demand, trade surplus was not expected to deteriorate sharply, this weakness could also be mitigated by stronger manufacturing exports, as indicated by the strong momentum in manufacturing shipments", says Barclays. 

In terms of markets, export demand from the US remains decent (7.6%), but weakness in China (1.9% y/y), Japan (-24.9% y/y) and Singapore (-14.9% y/y) remains a headwind for exports. The lack of significant deterioration in trade balance will help reduce concerns of a current account deficit. 

"A lower current account surplus in 2015 is expected, but it is likely to be firmly in a surplus territory. A lower GDP growth of 4.5% is expected in 2015, versus 6.0% in 2014", says Barclays in a note on Friday.