Published on 03 Mar 2020.
RAM Ratings estimates Malaysia’s imports and exports contracted a respective 6.6% and 5.1% in January, resulting in a RM12.0 bil trade surplus for the month. This is largely due to seasonally subdued regional industrial activity during the lunar new year festivities, compounded by industrial disruptions arising from the COVID-19 outbreak.
Given that the number of global COVID-19 infections are still rising, the outbreak is expected to remain a drag on global trade in the near term. The severity of COVID-19 is exacerbated by the fact that China is both the epicentre of the outbreak and a central node in the global value chain. China is the second largest source of value-added in the world after the US; a respective 12.3% and 12.7% of global gross exports can be attributed to value-added generated in China and the US.
Within ASEAN, Vietnamese exports are the most vulnerable given Vietnam’s significant reliance on China’s output. Some 14.1% of the former’s gross exports are attributable to value-added input derived from China, with the highest exposure recorded by machinery- and equipment-related exports. Malaysia comes next, with 7.7% of its exports relying on inputs from China. Much of Malaysia’s exposure centres on the electronics- and electrical-related sector, with 13.8% of its exported value consisting of Chinese-derived value-added input.
Woon Khai Jhek, CFA
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