Malaysia's trade surplus rose to a 5-month high in June, at MYR8.0bn, improving sharply from the MYR5.5bn in May. Exports unexpectedly rose 5.0% y/y in June, largely on the back of strong increases in electronics (13.5% y/y) and palm oil shipments (21.6% y/y). Imports, however, were soft, falling 1.5% y/y, with capital goods imports falling at the margin. This led to a rise in the trade surplus. Petroleum-related shipments continue to underperform, as LNG exports fell 45% y/y in June while refined petroleum exports were down ~10% y/y.



Barclays sees Q2 as the quarter in which the impact of lower oil prices on the trade balance was fully visible. In terms of markets, exports to China rose very sharply (+49.3% y/y), but exports to Japan and Australia, which rely on Malaysian oil and gas, remained in negative territory.



The trade surplus continues to hold up despite the adverse change in the terms of trade. In 1H 2015, Malaysia registered a trade surplus of MYR41.7bn, down only 7% from the MYR44.8bn in 1H 2014.



"While we continue to expect a smaller current account surplus y/y in 2015, the amount is expected to remain large, which should assuage concerns about Malaysia's external position. A weaker currency is also likely to lower import demand at the margin in 2H 2015. We forecast 2015 GDP growth of 4.5%, versus 6.0% in 2014", said Barclays in a report on Wednesday.