Exports likely to recover, says Affin Hwang Capital

PETALING JAYA: Affin Hwang Capital is maintaining its full-year export growth forecast of 1.5% in 2016 for Malaysia even as the shipments declined by 5.3% year-on-year in July, against market expectations of a 1.9% increase.
“We believe the decline in July’s export growth may be attributed partly to seasonal factors due to the festive season during the month. With expectations of commodity prices recovering, and manufactured goods holding up, export growth will likely recover, but should remain moderate in the months ahead, as export growth in 2H15 was strong amplified by the depreciation in ringgit,” Affin Hwang Capital said in a report yesterday.
With import growth supported by healthy domestic demand (infrastructure project investment and private consumption), it expects the trade surplus to narrow slightly to RM85.7 billion in 2016 (from RM94.6 billion in 2015).
“We are surprised that the sharp drop in export growth (in July) was broad-based and the declines were across all main product groups, including manufactured, agricultural and mining products. Similarly, on a three-month moving average basis, exports fell from 1.4% year-on-year in June to -0.9% in July, reflecting slower external environment.”
Meanwhile, HLIB Research said the contraction in exports that led to a narrowing of the trade surplus to RM1.9 billion in July is in line with its expectations as it continues to expect narrower surpluses in second half 2016 given weak global demand, still low liquefied natural gas prices and diminishing ringgit translation gain (ringgit is no longer depreciating on year-on-year basis).
It maintained its current account forecast at RM10 billion for 2016 (RM6.9 billion in the first half of the year).