The research firm viewed that although the latest sales data by Semiconductor Industry Association (SIA) marked a month-on-month 5.2% decline in January, China has the largest market share in semiconductors at 31.5%, which could provide positive spillover effects towards global demand
“Another contributing factor to Malaysia’s export strength in February is the low base effect as Chinese New Year was in January 2023 (versus February in 2022),” it said in a note.
Among the major exports, electrical and electronics (E&E) products were valued at RM44.27 billion and accounted for 39.4% of total exports, which increased by 11.7% from February 2022.
According to the statistics department (DoSM), Malaysian exports of E&E products to China grew 27.7% year-on-year (y-o-y) in February, with China becoming Malaysia’s second-highest export destination country.
Looking ahead, CGS-CIMB expects the overall outlook for Malaysia’s 2023 trade balance is still positive in the near term.
On a cumulative basis, the trade surplus remains sizeable at RM37.7 billion in the first two months of this year, compared to RM38.4 billion in the corresponding period in 2022.
“We believe this will be a positive support for Malaysia’s current account to achieve our forecast 2.1% of gross domestic product (GDP) for 2023,” it said.
Meanwhile, Moody’s Analytics said China’s recovery will be gradual with a slow acceleration of consumer spending and investment expected to lead the way.
The housing sector may add some heft by the second half as liquidity is directed to developers so that stalled projects can be completed.
Manufacturing for exports is the wild card in China’s outlook and depends upon the stability of demand from North America and Europe.
Rebound in the second quarter
It said the second quarter should mark the beginning of a rebound in the Asia-Pacific (APAC) region’s economy, led by the reopening economies of China and Hong Kong.
“While the currently available data remains weak, China’s official manufacturing and non-manufacturing PMI indexes and their components have all rebounded above the 50 neutral mark, indicating rising expectations.
“Recent data for China’s industrial production, retail sales and fixed-asset investment all showed growth, if modest, over the year,” it said in its APAC Outlook 2023: China’s Rebound is on Track commentary.
Additionally, Moody’s Analytics said the strongest was for investment spending, although it is still dominated by the 10.5% y-o-y growth among state-owned enterprises – indicative of the effect of government fiscal stimulus to kickstart the economy this year.
Year-on-year private-sector investment growth slowed slightly in the January/February period to 0.8% from 0.9%.
Finally, retail sales in China rebounded well in the January/February period, particularly for services, including catering, entertainment and transport.
“This mimics the pattern seen elsewhere in 2022 when economies around the world reopened following Covid-19. Spending on goods remains soft; indeed, auto sales have plummeted partly because of the end of subsidies offered for electric vehicles,” it added.