HSBC: 2014 trade outlook fairly stable

KUALA LUMPUR: The trade outlook for Malaysia is fairly stable and modest this year with a revival in goods exports projected for the second half of 2014, said HSBC Bank Malaysia Bhd (HSBC Malaysia) head of global trade and receivables finance Vincent C. Sugianto.
"For Malaysia, the Trade Confidence Index (TCI) fell by one point in the second half of 2013 but it is still stable. There is still stable demand and Malaysia's real gross domestic product (GDP) is expected to pick up this year," he told reporters at a briefing on the index yesterday.
The HSBC TCI surveyed a total of 23 markets, compiling six-month views of 5,550 exporters, importers and traders from small and mid-market enterprises on trade volume, buyer and supplier risks, the need for trade finance, access to trade finance and impact of foreign exchange on their businesses.
According to the index, an increase in global demand will help export volumes increase by 5.6% in 2014 and over 6% in 2015.
"We expect a pick up in goods exports in the second half of 2014 supported by growing global demand and higher export commodity prices, after a slow down in the second half of 2013.
"The biggest export for Malaysia is still electrical and electronic (E&E) products and the trend has not changed. If you see the composition between 2013 and 2012, it's exactly the same so there's no change in the industrial composition in Malaysia's industry," said Sugianto.
The index shows that high-tech goods exports account for 34% of Malaysia's total goods exports and given the country's strong foothold in global ICT, high-tech exports are likely to outpace overall goods exports by almost one percentage point a year between 2013 and 2030.
"Malaysia's strengths in industrial machinery, coupled with the government's aim to expand technology-intensive sectors such as high-end engineering, automotive and aerospace, mean that higher value-added exports are likely to become increasingly important."
Sugianto noted that while natural resources has been a big component of Malaysia's exports previously, going forward he expects these products will be processed and sold at a higher value to the export market.
In terms of export destinations, the top export destination for Malaysia in 2012 was Singapore, followed by China, Japan, the US and Hong Kong. In 2030, the top five export destinations for Malaysia are projected to be China, followed by Singapore, Japan, India and the US.
HSBC Malaysia head of commercial banking Andy Grisdale said Malaysian businesses are currently very internationalised in terms of its trading partners and trading regions, with an increase in inter-Asean trade expected over the next two to three years.
Grisdale also noted that emerging markets, including Malaysia, are moving away from purely manufacturing elements and are spending more on research and development (R&D) in the E&E and high-tech sector, with R&D expenditure nearing levels of mature markets.