Exports to feel impact of global uncertainties

KUALA LUMPUR: The growth of Malaysian exports in June is expected to be soft mainly because it did well last year, said economists.

A Business Times poll expects exports to post a 6.12 per cent average growth, imports 2.47 per cent growth and trade balance to average RM 7.71 billion.

The International Trade and Industry Ministry will release the data today.

The global growth story, which remains weighed by uncertainties, will have a strong impact on Malaysian exports, which posted 5.4 per cent growth in May.

Dr Chua Hak Bin, economist with the Bank of America Merrill Lynch, said electronic exports are likely to remain sluggish, contracting for the fourth consecutive month.

RHB Research, which is looking at a contraction in exports as well as imports, said it was concerned with the deepening sovereign debt crisis in Europe.

TA Research economist Patricia Oh said the slow economic rebound in Japan and ongoing global uncertainties are factors that will impact electrical and electronics (E&E) exports.

Japan contributes 11.4 per cent to total exports, while the US accounts for 8.3 per cent of Malaysian exports.

"Going forward, exports and imports will remain modest for the remaining of the year on the back of the slowdown in growth within the Asian region," Oh said.

Two major export markets, namely China and Singapore, have been showing signs of slowdown in the manufacturing sector in tandem with the stabilisation in terms of growth, she added.

Standard Chartered Bank (StanChart) sees exports improving as Malaysia heads into the second half of the year.

Supply chain disruptions due to Japanese earthquake should start to ease after imports from Tokyo suffered two consecutive month-on-month declines.

"Commodities should support the export sector. Although crude palm oil prices have eased recently, crude palm oil prices are still more than 20 per cent higher year-on-year," its economist Edward Lee said.

He expects consumer goods imports to remain robust after registering double-digit growth in April and May amid strong onshore sentiment, which should help to mitigate "lacklustre capital goods" and intermediate goods imports.

StanChart estimates the trade surplus to be around RM59 billion for the first of 2011, which it considers a very positive outcome and supports its medium term "overweight" stance on the ringgit.

US investment bank Citi said Singapore registered accelerating imports from Malaysia in ringgit terms (10.9 per cent in June from 1.6 per cent in May), while China also registered higher imports growth from China in ringgit terms (17.2 per cent in June from 16.8 per cent in May).

"Palm oil exports could also provide a boost - by the Palm Oil Registration and Licensing Authority's measure, the combine value of palm oil and palm kernel exports surged to 51.6 per cent year-on-year in June," Citi noted.