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Nikkei Markets

Malaysia August exports shrink unexpectedly, global trade woes weigh

Imports fall at fastest pace in a decade signalling gloomy outlook for shipments

Shipments of electrical and electronics goods, which account for more than one-third of Malaysia's total exports, fell 7.4% in August from a year earlier.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Malaysia's August exports unexpectedly contracted 0.8% from a year earlier dragged down by a decline in key electronics shipments, while imports fell at its sharpest pace in a decade, official data Friday showed.

Exports in August totalled 81.36 billion ringgit ($19.46 billion), according to the Ministry of International Trade and Industry. That compare with July's 1.7% year-on-year gain. Shipments declined 7.5% from a month earlier.

Economists said the latest data, including a sharp drop in imports, indicate gloomy economic outlook ahead with U.S.-China trade tensions showing no signs of abating.

"Continuous decline in imports of capital and intermediate goods indicate weak prospects for future exports," MIDF Amanah Investment Bank said in a note. "With faltering trade globally and loss of momentum in some major economies especially in Europe, we do not foresee a huge comeback."

Malaysia needs to put in place pre-emptive, contingency plans following a sharp cut in global trade growth forecast by the World Trade Organization, Finance Minister Lim Guan Eng said earlier Friday. "This is going to be a challenge," Lim said at a news conference.

On Tuesday, the World Trade Organization slashed its global trade growth forecast for 2019 to 1.2%, the weakest in a decade, from its previous target of 2.6%.

"Pre-emptive measures could be in the form of more cash handouts for the general public to spend," said RHB Research Institute Economist Peck Boon Soon. "Government can also increase its construction spending, which will be a straight-forward move to pump-priming the economy."

A protracted trade war between the U.S. and China - both major trading partners of Malaysia - have dented global trade, shaving off prospective growth as uncertainties mount. Apart from Malaysia, other export powerhouses in Asia have also been affected.

Japan's exports fell for the ninth consecutive month, while Singapore's non-oil domestic exports fell year-on-year for a sixth straight month. China's exports declined 1% year-on-year in August.

Shipments of electrical and electronics goods, which account for more than one-third of Malaysia's total exports, fell 7.4% in August from a year earlier, while petroleum product exports rose 7%.

Seasonally-adjusted exports of electronics probably fell 19.2% month-on-month, unwinding July's 21.4% surge, according to Barclays Economist Brian Tan. "This suggests the strong exports in July were more reflective of some front-loading of shipments rather than an actual pickup in demand."

In terms of markets, exports to Malaysia's largest trading partner China declined 2.8% year-on-year in August. Exports to Singapore shrank 7.2%.

Imports declined 12.5%, the worst since the 2009 Global Financial Crisis, to 70.43 billion ringgit in August, led by intermediate and capital goods. Imports fell 4.4% from the previous month.

Trade surplus widened sharply on year to 10.92 billion ringgit in August, but narrowed 23.5% on month.

--Jason Ng and Yimie Yong

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