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Global headwinds seen continuing to weigh on exports

PETALING JAYA: Analysts remain less optimistic on their outlook for Malaysia’s exports this year on the back of uncertainty in global trade and growth slowdown in the key export markets.

In a note last Friday, PublicInvest Research said it is of the view that the recent export numbers moderated amid unresolved trade disputes that pushed traders to be cautious and calculative in their commercial decisions.

“Trade negotiations are ongoing and given the depth and complexity of the matter, this could last for the entire second quarter (Q2), suggesting that trade may not rebound until then.

“We expect a piece-meal solution at the very least which should be enough to give trade the jolt it needs. Traders and exporters may remain cautious and calculative with their commerce-related decisions until then,” it explained.

Nevertheless, the research house said Malaysia is in the best position to gain from a global trade rebound, thanks to the competitive ringgit and ample capacity in the economy.

Meanwhile, BIMB Securities Research opined that 2019 would be a challenging year for Malaysia’s exports primarily weighed by the trade tension between the US and China, prospect of cooling global growth, China’s slowing economy, a weak EU economy and sluggish demand for commodities.

“There is also expected to be a slower global demand for electrical and electronics (E&E) products,” it said.

According to the Semiconductor Industry Association, the global semiconductor sales were up 13.7% in 2018, but it is forecasted to decline 3%.

Overall, BIMB Securities believes that there will be a general slowdown in the global economy that would impact exports this year and it anticipates the exports growth to slow down to 3.4% in 2019.

“Moving forward, based on the latest manufacturing Purchasing Managers’ Index (PMI) reports, we are cautiously sanguine in the near-term as new exports orders are weakening despite expansion in the region’s manufacturing activity.

“We maintain our view that trade performance would remain subdued going forward. After almost reaching the RM1 trillion mark in 2018 (2018 export: RM998 billion) with a year-on-year growth of 6.7%, it will be tough for exports to achieve the same figure this year with the anticipated slower global growth.”

However, UOB Research said the uptick in recent PMI from US, China and the region in March, alongside signs of constructive US-China talks, could help Malaysia’s exports and industrial activity turn the corner in Q2’2019.