KUALA LUMPUR: Malaysia's trade recovery is underway albeit bumpy following the decline in exports for February, said UOB Research in a note.
Exports reversed course and fell back into contraction in February, down 0.8 per cent year-on-year (YoY) after a robust growth rebound to 8.7 per cent in January.
UOB said the outturn defied its estimate for a 3.0 per cent growth and Bloomberg consensus of a 2.4 per cent growth.
"The performance in early 2024 would be somewhat choppy due to seasonality effects during the festive period as well as potential disruptions and delays from the Red Sea crisis.
"However, the continued strength in import demand particularly for the imports of intermediate goods presages a positive export trend in coming months," it said.
It added other positive signs for a sustained expansion including rising exports to G3 economies mainly lifted by shipments to the United States and Japan and robust commodity exports supported by higher volumes.
It noted China's latest trade and industrial output showed signs of recovery with gains in exports by 7.1 per cent and industrial output of 7.0 per cent YoY which is a positive sign for a sustained expansion.
Further catalyst will be the anticipation of a 3.3 per cent growth in 2024 in the global trade outlook by the World Trade Organisation (WTO) and International Monetary Fund (IMF).
"Malaysia's latest manufacturing Purchasing Manager Index (PMI) rose to its highest level in 18 months while new export orders continued to trend up to a 10-month high. Both indices are just under the 50 threshold.
"The uptrend is in line with the global PMI and Asean PMI indices, suggesting that Malaysia's trade performance is moving in-step with broader global trends.
"This supports our modest export growth outlook of 3.5 per cent for Malaysia in 2024, which will be driven by higher exports of E&E, machinery and commodities," it said.
It added that the channel checks revealed that an expected electrical and electronic recovery is likely to set in more evident in the later part of the year.