Economy 2Q14 GDP is going to Be Blazing Pace Again; May Export Growth 16.3% Y-o-Y

by **Cals** Tue 08 Jul 2014, 08:31

Economy 2Q14 GDP is going to Be Blazing Pace Again; May Export Growth 16.3% Y-o-Y

Business & Markets 2014

Written by Rosnani Rasul of M & A Securities Research

Monday, 07 July 2014 08:30

KUALA LUMPUR (July 7): Malaysia’s month of May export grew at a strong pace of 16.3% year-on-year (April: 18.9%; March: 8.4%) but slowed down by 2.2% month-on-month, pushing year-to-date (YTD) export growth to average at 13.5%.
With the first 2 months of second quarter export had averaged of 17.6% against 1Q14 average of 10.9%, we opine that there is a growing chance that 2Q14 GDP is going to as equally good as 1Q14 if not better.
Import growth came in at 11.9% in May, more than double than April’s growth of 5.0%, pushing trade surplus to RM5.72 billion for the month with YTD trade surplus reaching a healthy RM40.7 billion.
Malaysia’s total trade for the first 5 months of 2014 rose by 10.2%, an encouraging sign in line with WTO solid forecast for global trade growth this year.
We reiterate our view that several key factors have pushed Malaysia’s export to be robust YTD including 1) Ringgit competitiveness and 2) pockets of recovery in key parts of the world most notably the Eurozone which is predicted to record first output growth of 1.1% in 2014 (2013: -0.5%).
Ringgit YTD had averaged at RM3.26 per Dollar YTD against RM3.21 in 4Q13 and RM3.08 in 1Q13 respectively.
We predict Ringgit to average at RM3.20-RM3.25 per Dollar in 2014 compared to 2013 average of RM3.17 per Dollar.
Going forward, there are signs that Ringgit may gain some strength especially when capital inflow has been very rapid off late.
In line with that, Ringgit is currently trading at RM3.20 per Dollar against RM3.22 in May.
As we predict that capital inflow will continue to be steady in 2H14 driven by Malaysia’s fiscal and monetary competitiveness, Ringgit’s role in pushing export may wane over time.
Hence, we warn that export growth may reach its peak in 2Q14.