Malaysia Exports Better Than Expected; Rate Pause Seen

04 Jul 2012

-- Malaysia exports rebounded 6.7% in May after two consecutive months of contraction -- Economists say favourable base effect helped May readings and are cautious about full-year outlook -- Central bank widely expected to keep rates steady at meeting Thursday KUALA LUMPUR--Malaysian export figures were much better than expected in May, rebounding strongly after two months of contraction, bolstering the case for the central bank to keep interest rates steady and easing concerns over the trade-dependent country's economy. Overseas shipments rose 6.7% from a year earlier in May, the Ministry of International Trade and Industry said in a statement Wednesday, compared with the median forecast for a 5.3% expansion in a Dow Jones Newswires poll of 11 economists and the 0.1% contraction in April. But RHB Research Institute economist Peck Boon Soon said the figure was boosted by a low comparison base, and pointed to weak month-on-month growth due to concerns over the European sovereign debt crisis, which have hit business and consumer confidence. "Even though it is a strong rebound, we need to be a bit cautious because of the lower base effect, and overall, the external outlook remain quite uncertain in the next few months," he said. May's exports were up 1.8% from the previous month, compared with April's 6.6% fall from March. Exports totaled 58.78 billion ringgit ($18.70 billion) in May compared with MYR55.09 billion during the same month last year, the ministry said. Imports grew 16.2% to MYR54.17 billion, indicating domestic demand has been resilient, fueled by robust private investment. That compares with the 8.5% rise expected in the poll. The trade surplus was MYR4.60 billion, narrowing sharply from April's MYR7.51 billion. Economists widely expect Malaysia's central bank to keep the overnight policy rate steady at 3.00% when its meets Thursday for its fourth policy review this year. All 13 economists polled by Dow Jones Newswires expect Bank Negara Malaysia to keep the benchmark interest rate on hold for the seventh time in succession. "The better export reading in May and strong capital goods imports, reflecting ongoing investment growth, should provide the central bank with some comfort on the growth front; it is therefore likely to save its ammunition for a potential emergency in the future," said Credit Suisse economist Santitarn Sathirathai. Exports to the Asean region, the country's biggest export destination, rose 19.7% during May while shipments to Japan and China rose 12.1% and 1.4%, respectively. Exports to the European Union decreased 3.2%. Exports of electrical and electronics products, which account for about a third of total exports, increased 1.1% on the year in May at MYR19.29 billion, mainly due to higher demand from the U.S., Thailand and Vietnam, the ministry said. Malaysia has said it expects exports to grow between 5.0% and 6.0% this year after expanding 8.7% in 2011.