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Nikkei Markets

Malaysia's June exports growth gathers pace

Global trade headwinds cloud prospects of future shipments from a slowing economy

a container yard at North Port in Port Klang outside Kuala Lumpur
Brewing trade tensions between the U.S and its major trading partners on top of escalating geopolitical tension could be a headwind to global trade including Malaysia.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Malaysia's exports growth picked up pace, rising 7.6% in June from a year earlier, thanks to stronger shipments of electronics and demand from China, official data Friday showed.

Exports in June totalled 78.7 billion ringgit ($19.29 billion), according to data released by the Department of Statistics. That compares with May's 3.4% year-on-year gain. On a month-on-month, seasonally-adjusted basis, exports declined 5.4% in June.

Economists flagged headwinds ahead fanned by a global trade war that could further weigh on trade-reliant Southeast Asian nation already grappling with moderating economic growth.

"Activity data like industrial production and crude palm oil production suggest a further slowdown in GDP growth is likely," Nomura Economists Euben Paracuelles and Brian Tan said in a note to clients. A sharp cut in government spending will probably offset a surge in private consumption, they wrote.

Shipments of electrical and electronics goods, which account for more than one-third of Malaysia's total exports, increased 6.9% in June from a year earlier, while refined petroleum products climbed 40.6%.

In terms of markets, exports to Malaysia's largest trading partner China surged 16.9% year-on-year in June.

"Underpinned by optimistic signs of key global indicators and gradual recovery in commodities prices, we foresee Malaysia's exports will expand by 9.3% this year" compared to 18.9% in 2017, said MIDF Amanah Investment Bank.

However, brewing trade tensions between the U.S and its major trading partners on top of escalating geopolitical tension could be a headwind to global trade including Malaysia, MIDF added.

Imports, meanwhile, were up 14.7% to 72.60 billion ringgit in June from a year earlier, largely driven by intermediate and capital goods. On a month-on-month, seasonally-adjusted basis, imports increased 0.3% in June.

Exports growth lagged import growth in June, a reversal of the trend through the previous five months. Trade surplus narrowed to 6 billion ringgit in June, down 38.9% on year and 25.5% from the previous month.

In the first quarter, Malaysia's economy expanded 5.4%, the pace slowing from 5.9% in the final three months of 2017. The government is expected to release second-quarter GDP data on Aug. 16 but has said it is confident that economy will grow 5% this year.

--Jason Ng

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