Malaysia to benefit from recovery in China and US

Malaysia to benefit from recovery in China and US

01 Feb 2021

KUCHING: Malaysia will benefit from the strong recovery in its main trading partners China and the US, analysts opine, as others also project that the country’s exports will remain resilient in the next one to two months.

According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), Malaysia’s trade performance is expected to rebound in 2021 on the back of resumption in activities globally driven by a return to normalcy in global supply chain.

“Competitive commodities prices and spare capacity will be an additional impetus to the recovery,” MIDF Research said.

“Investment appetite is also likely to improve propelled by better clarity amid vaccine availability. Malaysia will benefit from the strong recovery in our main trading partners China and the US.

“IMF in its latest economic outlook, foresee higher global growth of 5.5 per cent in 2021, 0.3 per cent percentage point higher than its October’s version with a strong rebound in the US at 5.1 per cent year on year (y-o-y) and China at 8.1 per cent y-o-y.”

The research arm highlighted that vaccine roll-out along with massive fiscal and monetary policy support in major economies will boost demand.

“Strong momentum in the second half of 2020 (2H20) will be carried over in 2021 and hence we revised our exports and imports growth forecast upward to 8.1 per cent y-o-y and 8.7 per cent y-o-y from initial estimate of 5.3 per cent y-o-y and six per cent y-o-y respectively.”

It noted that robust export and import performance for December 2020 signalled a sustained recovery despite the return of restrictive measures in key countries amid new wave of Covid-19.

Meanwhile, RHB Investment Bank Bhd (RHB Investment Bank) expected Malaysia’s exports to remain resilient in the next one to two months as demand from China could remain resilient and the global semiconductor upcycle could have more room to run.

“Malaysia exports to China grew 13.5 per cent y-o-y in December versus the November print of 13.2 per cent. China (plus Hong Kong) accounts for over 20 per cent of Malaysia’s exports,” the research firm gathered.

“Second, the semiconductor segment is riding on the upcycle led by new technologies. The 5G rollout as well as development such as Internet of Things, artificial intelligence and electric vehicles are expected to continue this year, aided by strong government support.

“The US-based Semiconductor Industry Association (SIA) expected sales growth of 8.4 per cent y-o-y this year compared to 5.1 per cent in 2020. The electrical and electronics accounts for 46 per cent of Malaysia’s exports.”

On palm oil exports, in RHB Investment Bank’s assessment, it could soften for the next few months and pose some drag on aggregate exports.

The research firm recalled that December palm oil prices recorded a 10-year high of RM3,624 per tonne (28.3 per cent y-o-y), while export volume grew at 16.4 per cent y-o-y during the same period.

“December demand is particularly strong due to rush purchases ahead of the expected imposition of export duties by Malaysia in January 2021.

“However, in the near-term, as these one-off factors dissipate, palm oil exports could revert to mean.

“The upside risks to palm oil exports is the low inventory position of importing nations, which could keep demand strong.”

Source: The Borneo Post