BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2012(029624)

Friday, 10 February, 2012

Economics
Modest Export Outlook in 2012
Export deceleration continues in December 2012. Malaysias overall overseas shipments rose 6.1% YoY in December 2011, slightly faster than our and market expectations. Facing headwinds from flagging export demand as a result of slowing global economy due particularly to the on-going Euro zone sovereign debt crisis, sluggish US recovery, continued electrical & electronics (E&E) downcycle and slow return to normalcy to global supply chains for certain industries in Thailand following its worst flooding disaster in almost 70 years, not only the export performance during the final month of 2011 was weaker compared to the 8% YoY increase in November 2011, it also confirmed the deceleration to a single-digit growth trajectory for the second month in a row. Still, at RM60.74 billion, the export value was the highest ever recorded for the month of December but the second highest throughout 2011, not far behind the amount of RM61.87 billion posted in March 2011. Export market diversification and commodity cushion. In December 2011, solid YoY gains in exports to Australia (+86.3%), Indonesia (+22.7%), Japan (+18.3%), China (+10.8%), South Korea (+9.6%) and India (+5.2%) proved to be more than sufficient to outweigh YoY declines in shipments to Hong Kong (-9.2%), Thailand (-3.5%), Singapore (-4.2%) and the US (-2.8%). Except for refined petroleum products (3.3%), favourable price effects played a significant role in turning all other major commodities and resource-based products in particular LNG (+50.5%), rubber products (+15.6%), crude petroleum (+9.3%), palm oil (+8.4%) and chemicals & chemical products (+4.5%) into major export drivers on a YoY basis, together with machinery, appliances & parts (+17.9%) and manufactures of metal (+3.1%) to more than offset the E&E slide (-2.2%). As imports expanded at a much faster pace of 10.4% YoY in particular sourced from Singapore (+32.6% YoY) and China (+34.1% YoY), trade surplus shrank 15.1% YoY to RM8.3 billion in December 2011. Several external trade milestones for Malaysia in 2011. Throughout 2011, Malaysias total trade jumped by 8.7% to RM1.269 trillion, the highest value of exports and imports ever registered despite the multitude of global uncertainties, cautious global business and consumer sentiment and volatile global investment climate. Since the expansion rate for both gross exports (+8.7%) and gross imports (+8.6%) was almost the same, trade surplus widened by 9.4% in 2011 to RM120.3 th billion. This marks the 14 consecutive year of trade surplus for Malaysia since 1998, an achievement comparable to developed nations in the region such as Singapore and South Korea.
The Research Team research@bimbsec.com.my 03-26918887 ext 111

China retained its position as Malaysias largest trading partner (13.2% of total trade), sealed since 2009, emerged as Malaysias largest export market (13.1% of total exports) for the first time ever, eclipsing Singapore and remained as the most

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10 February 2012 important source of imports (13.3% of total imports). Similarly, at No 10, Taiwan made it to Malaysias list of Top 10 largest export destinations in 2011 for the first time ever. Other major trading partners in 2011 were Singapore (12.7%), Japan (11.5%), the USA (8.9%) and Thailand (5.5%). ASEAN accounted for 24.7% of Malaysias total exports in 2011 with gains across the board except Laos. Growing importance of intra-regional trade brings us a step closer towards becoming a single market under the ASEAN Economic Community by 2015. The continued descent in the US significance as Malaysias major export destination highlights waning demand for Malaysian E&E products, the biggest category of US-bound exports and the increasing trend of relocating manufacturing and production bases out of Malaysia in favour of emerging low-cost centres in the region. Global slowdown to crimp exports. Notwithstanding some bright spots in the global economy such as recent improvement in US macroeconomic indicators, a flicker of hope for an effective resolution to the Euro zone debt crisis and increasing number of factories and companies resuming operations in Thailand and Japan to meet pent-up demand, forward-looking export orders would suggest rather subdued export outlook for Malaysia at least in the 1H2012. Reflecting the International Monetary Funds (IMF) recent forecast of a moderation in world trade growth to 3.8% this year from 6.9% in 2011, the official guidance is for a 5%-6% growth in Malaysias total trade for 2012. Prospects for sales of Malaysian goods abroad will remain dictated by the global financial stability and the economic health of Malaysias key export destinations. However, Malaysia can count on stronger GDP growth projected for East Asia and South Asia to offset to a certain extent lethargic growth or even contraction in developed nations. Intra-Asian trade especially with ASEAN, China and India will remain one of the key contributors to export growth for Malaysia in 2012.

Growth of Monthly Gross Exports & Imports (% YoY)

50 40 30 20 10 0 -10 -20 -30 -40 Gross Exports fob Gross Imports cif
Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11

Export Diversification: Major Markets

TOP 10 SINGLE COUNTRY EXPORT MARKETS 2011 2010 YoY Growth Share of Total in 2011 RM million % % China 91246.8 80104.6 13.91 13.14 Singapore 88160.7 85253.1 3.41 12.69 Japan 79965.6 66763.1 19.78 11.51 USA 57577.7 60950.9 -5.53 8.29 Thailand 35719.9 34136.2 4.64 5.14 Hong Kong SAR 31241.9 32407.9 -3.60 4.50 India 28178.9 20933.5 34.61 4.06 South Korea 25819.5 24330.5 6.12 3.72 Australia 25109.5 24016.2 4.55 3.62 Taiwan 22706.5 20208.9 12.36 3.27 Total Gross Exports 694548.5 638822.5 8.72 100.00
Source: MATRADE, BIMB Securities

Source: MATRADE, BIMB Securities

Export Diversification: Major Products

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10 February 2012
TOP 10 EXPORT PRODUCTS 2011 2010 YoY Growth Share of Total in 2011 RM million % % Electrical & Electronics Products 236534.9 249907.3 -5.35 34.06 Palm Oil 64829.2 47704.6 35.90 9.33 LNG 49963.4 38741.6 28.97 7.19 Chemicals & Chemical Products 47190.2 40694.5 15.96 6.79 Refined Petroleum Products 36531.2 28711.4 27.24 5.26 Crude Petroleum 32924.0 31026.0 6.12 4.74 Machinery, Appliances & Parts 23595.8 21239.3 11.09 3.40 Manufactures of Metal 21468.1 18378.4 16.81 3.09 Optical & Scientific Equipment 18753.8 18318.6 2.38 2.70 Rubber Products 18142.7 16025.6 13.21 2.61 Total Gross Exports 694548.5 638822.5 8.72 100.00
Source: MATRADE, BIMB Securities

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10 February 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system: STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

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BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

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