Within the first nine months of the year, Malaysia recorded an increase of export value of RM49.54 billion (+4.9%) compared to the same period last year, driven by key sectors such as refined petroleum products, integrated electronic circuits, telecommunications equipment, parts and accessories.
According to Malaysia External Trade Development Corporation (MATRADE) chairman Datuk Seri Reezal Merican Naina Merican, Malaysia is one of the critical destinations in the national export sector, given its export connectivity to major trading partners such as China, US, Indonesia and Singapore.
“The importance of Kuala Lumpur (KL) is also reflected in its economic growth rate, which increased by 3.7% in 2023 compared to 9,4% in the previous year with a gross domestic product (GDP) of RM249.3 billion.
“KL is also one of the four states that recorded growth exceeding the national growth rate (3.6%) in 2023,” he said, adding that KL registered a trade value of RM157.87 billion (+3.6%) in 2023 from the previous year, while total exports amounted to RM66.24 billion (+0.6%).
Based on MATRADE’s Exporters Database (MER), a total of 2,654 companies in KL are nor registered with MER, representing 18.4% of the total 14,464 exporters in the city, including 2,454 MSMEs.
“I am confident that there are still companies in KL with export potential and I encourage more companies to register with MATRADE,” he stated.
He also announced that the MyTRADE DIGITAL platform will significantly contribute in supporting trade digitisation and aiding Malaysia’s export growth, which is expected to start in 2025.
Exporting companies will be able to interact virtually with the international business community, opening up new opportunities for companies to expand their global markets through online sales transactions for both business-to-business (B2B) and business-to-consumer (B2C) segments.
At the same time, the re-election of US President Donald Trump is also expected to benefit Malaysia through higher investments and enhanced export potential in sectors like electronics, machinery and palm oil due to the China Plus One strategy.
According to CIMB Securities senior economist Vincent Loo, Trump’s return to the White House solidifies a trajectory of heightened tariffs and protectionist policies, including a proposed 10% tariff on all imports and a specific 60% tariff on Chinese goods.
“With escalating US-China trade tensions, Malaysia could see increased export demand from US companies looking to source products outside China, creating export growth opportunities in high-value sectors,” he said in a research note.
He also pointed out that foreign direct investment (FDI) in Malaysia is expected to rise as companies seek table manufacturing bases in the ASEAN region, with the country emerging as a competitive destination from the promising infrastructure and relatively lower production costs.
“However, renewed trade uncertainty may lead to risk-off sentiment in financial markets, prompting investors to seek safe-haven assets, supporting a stronger US dollar and accentuating capital outflows from emerging markets, including Malaysia,” he opined.
Loo noted that increased tariffs on Chinese goods may prompt US companies to shift sourcing from China to Malaysia, increasing demand for Malaysian exports of semiconductors and electronic components.
Still, if trade tensions escalate, overall demand might decline, curtailing exports to both the US and China.
Similar to electrical and electronics (E&E) exports, Loo believes that Malaysia’s machinery and appliance exports stand to gain as the US seeks alternatives to Chinese products.
“Yet, heightened tariffs and trade barriers could raise costs and reduce global trade demand, impacting Malaysia’s trade volume,” he warned.
Meanwhile, Hong Leong Investment Bank (HLIB) said the proliferation of the China Plus One strategy would benefit Malaysia’s electronic manufacturing services sector as brand owners shift or diversify their manufacturing from China, while increased FDI to Malaysia would benefit sectors like construction, industrial property and real estate investment trust.
It also said that more economic fluidity and market volatility are expected under a Trump presidency, given his confrontational style.
“This isn’t entirely a bad thing, nothing that Malaysia did benefit from the ongoing US-China trade war. However, the key risk this time around is if he drags the entire world into it as well with his proposed blanket 10-20% tariff – the US was Malaysia’s third largest export destination in 2023 at 11.3%,” it added.
That being said, MIDF Amanah Investment Bank Bhd remains optimistic about Malaysia’s trade outlook and the growth prospects of the manufacturing sector, given the recent improved export demand.
The research firm expects Malaysia’s production activities to continue to grow, supported by the recovery in external demand.
Based on the S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) in November 2024, export orders from international markets experienced growth, which is likely due to growing demand across the Asia-Pacific region.
Despite that, the index slipped further to 49.2 compared to October’s 49.5, marking it the lowest reading in seven months and extending contraction to six consecutive months.
The decline reflects broad-based weaknesses in the manufacturing sector and is primarily attributed to contractions in new orders, output and inventory levels.
Notably, new orders registered the sharpest fall in seven months. Backlogs of work stabilized, reaching a four-month high, largely due to limited production capacity.
Additionally, delivery time continued to lengthen for the seventh straight month, largely explained by supply chain disruptions linked to the ongoing Red Sea crisis.
Cost pressures for manufacturers elevated as input prices rose, mainly driven by higher commodity prices and a depreciating ringgit.
Employment showed little changes and business confidence remained solid but stayed below its long-run average of 56.2 as firms remained cautious about the uncertain timeline of a domestic demand recovery.
