Malaysian trade figures for August will disappoint

Malaysian trade figures for August will disappoint. Export sales will likely fall by 0.3% YoY against the backdrop of weak external demand while import growth is expected to post a modest 2.4% increase. This will deliver an overall trade surplus of MYR 2.2bn, down from an already low level of MYR 2.4bn in the previous month. This will surely exacerbate the concerns over the current account as well as the ringgit. 

Similar to many Asian economies, Malaysia is struggling with weakness on the external front. Trade surplus is narrowing given the slump in commodity and energy prices. Exports over the past 12 months have been falling much faster than imports. As a result, trade balance fell by about 7% in 1H15 compared to the same period last year. 

External uncertainties compounded with weak domestic fundamentals have put the ringgit under significant pressure. The local currency is already the worst performing Asian currency year-to-date. Expect more pressure on the ringgit arising from the poor trade figures.