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Malaysia export fall slows, sales to China rise

Posted on: April 6, 2009

Reuters – Friday, April 3

* Malaysian exports tumble but not as badly as expected

* Export increase to China more evidence of Chinese bottoming

* Malaysian central bank expected to cut rates further

By Varsha Tickoo

KUALA LUMPUR, April 3 – Malaysia’s exports fell in February but not as badly as expected, with a rebound in sales to China offering further evidence that the world’s third-largest economy may have bottomed out.

February exports <MYEXP=ECI> fell 15.9 percent from a year earlier, government data showed on Friday, much less than a 28 percent fall in January and a 25 percent drop economists expected.

But exports to China rose nearly 7 percent from a year ago, compared with a 33 percent drop in January, making it the fourth-biggest market for Malaysian goods behind other Southeast Asian countries, Japan and the United States.

“That fits with evidence that China is turning around,” said HSBC economist Robert Prior-Wandesforde.

A growing number of economists and Chinese officials argue China’s economy may have turned the corner, despite still weak exports to the recession-hit West.

Data on Thursday showed China’s official purchasing managers’ index, a measure of manufacturing activity, expanded in March for the first time since September, as output and new orders surged.

Companies in Taiwan reported a surge of rush orders from China following the Lunar New Year holidays in late January, helping to cushion a slump in total export orders.

But China alone cannot pull the world out of the economic crisis, and it is still not clear if Chinese firms are merely replenishing inventories in a flurry of one-off buying or if they are seeing more lasting consumer demand, analysts said.

“While it is too early to say if the recovery of Chinese appetite for Malaysian and Southeast Asian exports can be sustained, we remain cautiously optimistic that export-oriented economies may benefit from stimulus packages in China,” said Standard Chartered’s Alvin Liew.

South Korea said on Friday it expected industrial output to rise for the third straight month in March on the back of a slight improvement in exports [ID:nSEO27025], while Singapore said last month exports to China had rebounded even though shipments to other markets were still falling [ID:nSIN467087].

Several U.S. economic reports this week also pointed to signs of bottoming in the world’s-largest economy, a key buyer of Asian goods, with factory orders rebounding.


Malaysia’s latest export figures have fuelled expectations that its central bank will cut interest rates again in a bid to spur the economy, although policymakers can do little to revive exports as long as U.S. and European demand fizzles.

Bank Negara has already sliced 150 basis points off its key rate <MYINTR=ECI> since October to a record low of 2 percent.

Combined exports for January and February fell 22.2 percent from a year-earlier, discounting the effect of the Lunar New Year holiday that fell in February last year and in January this year.

“With no indication of recovery in consumer demand in the U.S., our exports will still be depressed,” said Kenanga economist Wan Suhaimi. “Within the first half of this year, we expect another 50 basis point rate cut .”

Malaysia’s exports to China fell nearly 15 percent in January and February combined, but the rebound in February gave economists some room for hope.

“The China data is looking better… I don’t want to say we are out of the woods yet,” said JP Morgan’s Matt Hildebrandt.

As exports of electronics and commodities tumbled, Malaysia’s economy stalled in the fourth quarter, growing only 0.1 percent compared with 4.7 percent in the third quarter. It is expected to contract 1.2 percent this year, a Reuters poll showed <MYGDP1>.

For a graphic on Malaysia’s GDP and exports, double click on:


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