KUALA LUMPUR (Nikkei Markets) -- Malaysia's exports rebounded in July thanks to strong shipments of electrical and electronic products, official data Wednesday showed, although economists flagged prospects of external demand slowing in the months ahead as the world's two top economies stay locked in a tariff tussle.
Exports in July totalled 87.96 billion ringgit ($20.89 billion), an increase of 1.7% from the same month last year, according to data released by the Ministry Of International Trade and Industry. That compared with June's 3.1% year-on-year decline.
Economists said strong exports would probably help support Malaysia's economic growth through the rest of the year though external risks have risen with the U.S.-China trade tensions showing no sign of easing.
"Electronics exports picked up in line with the region," said Brian Tan, a Singapore-based economist at Barclays Bank. "However, we view the positive July outturn with caution."
Other major trade-reliant countries in Asia have reported a slump in exports in July amid heightened tensions between U.S. and China. Exports of Taiwan fell 0.5% year-on-year, while South Korea's exports dropped 11% in July from a year earlier. Japan's shipments declined 1.5%. The trend continued with South Korea - one among the earliest major Asian countries to release its trade data - reporting a near 14% decline in exports in August.
Across Southeast Asia, manufacturing conditions have worsened with the IHS Markit Manufacturing PMI signalling deterioration at the fastest pace since November 2015. The manufacturing PMI for Malaysia fell further to 47.4 in August from 47.6 in the previous month.
Shipments of electrical and electronics goods, which account for more than one-third of Malaysia's total exports, rose 4.5% in July from a year earlier, while petroleum product shipments rose 2.8%.
"Electrical and electronics continue to be the key driver," said ING's Economist Prakash Sakpal. "Semiconductors continued to lead the way with 10.3% growth, a sustained outperformance in Asia, lending credence to the view that Malaysia is moving up the electronics value chain."
In terms of markets, exports to Malaysia's largest trading partner China gained 3.8% year-on-year in July. Exports to Singapore rose 3.1%.
Imports contracted 5.9% to 73.69 billion ringgit in July, led by fall in procurements of intermediate and capital goods. That helped to widen trade surplus to 14.27 billion ringgit in July, up 75.6% on year and 35.8% on month.
Still, continuous decline in imports of capital goods and intermediate products-semi-finished components such as electronic circuits and automotive parts used in assembly of computers and vehicles--indicate weak prospects ahead, MIDF Amanah Investment Bank said in a note to clients.
"Weak intermediate and capital spending signal that manufacturers are not optimistic on the future demand for its products," MIDF said.
-- Jason Ng