Market Performance

ASEAN continued to provide a strong regional market for Malaysia, with exports increasing by 10.6% in September from a year ago. Exports to ASEAN amounted to RM13.71 billion, accounting for 23.4% of Malaysia's total exports in September 2011.

Export growth to ASEAN for the fourth quarter of the year is however, expected to be impacted by the floods in Thailand. Malaysia's exports to Thailand comprise mainly industrial products, including intermediate goods.

Repercussions arising from the severe flood will include contraction in consumption, investment and a slowing down of industrial production, particularly in electronic appliances and parts, hard disk drives, automotives, textiles and garments. Exports to Thailand in the fourth quarter of 2011 that may be affected are automotive parts and accessories, chemical and chemical products, machinery and transport equipment as well as E&E products.

Despite reports that there is a deceleration in manufacturing activities in the PRC, Malaysia's September exports to the country rose 34.6% to RM8.59 billion, mainly contributed by the increase in exports of palm oil, chemicals and chemical products, crude rubber, E&E products, LNG, rubber products, as well as, iron and steel products. This shows that the consumption is still strong in PRC. Higher exports of LNG, petroleum products, crude petroleum, chemicals and chemical products, optical and scientific equipment, as well as, palm oil, contributed to the 27% increase in exports to Japan. Exports in September 2011 were valued at RM7.18 billion, with the largest export item being LNG. The demand for LNG in Japan has been increasing due to power shortages affected by the earthquake and tsunami.

Trade with Japan is expected to improve as the Japanese economy shows signs of recovery. Production level in Japan has started to improve and is expected to fully recover by the end of 2011. Japanese manufacturers have begun to procure parts and components from alternative suppliers overseas such as China and other Asian regions. The industries related to building materials are expecting that sales will increase resulting from the reconstruction of the Tohoku Region.

Japanese automotive makers and electronics manufacturers have suspended their production in Thailand due to floods and this is expected to create demand for Malaysia's exports of automotive parts and E&E products.

Exports to the European Union (EU) increased by 7.6% to RM5.87 billion, despite the crisis in the Euro zone. The increase in exports was attributed to higher exports of crude rubber, palm oil and manufactures of metal. Increases in exports were seen mainly to Netherlands, Belgium and France. With growing uncertainties in the Euro zone markets, Malaysia's exports to this region will face challenges in upcoming months.

In September 2011, exports to the USA increased by 8.7% to RM4.96 billion compared to September 2010. However the outlook for the USA's economy still seems gloomy. Declining confidence in the economy and job insecurity is taking a toll on consumer spending. Even the consumer behavior is changing, where many are looking for cheaper brands and shopping in dollar stores.

Overall, it is expected that Malaysia's exports to the USA in 2011 will experience negative growth.

For January to September 2011 exports to these economies were as follows:

- ASEAN, up by 5.7% to RM126.91 billion;
- PRC, up by 13.4% to RM67.83 billion;
- Japan, up by 17.6% to RM57.41 billion;
- EU, up by 5% to RM53.47 billion; and
- USA, down by 6.2% to RM43.04 billion.

Source: Malaysia External Trade Development Corporation, 4 November 2011