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Boston, MA -- (ReleaseWire) -- 02/14/2014 --Exports To Drag On Growth, But Major Ports Defiant

Malaysia's latest real GDP growth reading came in decisively weak at 4.3% year-on-year for Q213, vindicating our core view that cooling Chinese economic growth would weigh heavily on the export sector. Indeed, looking at the breakdown of GDP by expenditure, the weaker-than-expected reading (Bloomberg consensus stood at around 4.8% prior to the release) was largely due to a sharp contraction in net exports. Net exports suffered the sixth quarter of contraction since Q411, recording a negative 3.3 percentage points (pps) contribution to headline growth of 4.3% y-o-y in Q213.

Looking ahead, we expect cooling external demand to continue to drag on the overall economy and that Malaysia's full-year real GDP growth for 2014 will come in relatively weak at just 4.4%, with the balance of risks slightly skewed to the downside.

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Despite this, we have revised upwards our forecasts for 2014 activity levels at the country's major ports (Port Klang and Port Tanjung Pelepas), largely as a result of expansion projects and developments within the past year. While we still expect most ports to lag, rather than lead GDP percentage growth, box traffic at the major ports should see significant growth in 2014 and beyond.

Headline Industry Data

- The real value of Malaysia's total trade will rise by 4.4% in 2014 - a slowing on the estimated 4.5% expansion experienced in 2013. 2015 growth should again rise to 4.5%.
- Total cargo volume handled at Port Klang will rise by 3.0% to 209.75mn tonnes in 2014, while volume at the Port of Tanjung Pelepas will rise by a slightly higher 3.2% to 126.18mn tonnes.
- 2014 box traffic at Port Klang is projected to rise 8.79% to 11.4mn twenty-foot equivalent units (TEUs), while at the Port of Tanjung Pelepas a gain of 4.5% to 8.29mn TEUs is expected.

Key Industry Trends

Shipping Industry Calls For Government Relief Fund: The Malaysian shipping industry has once again sent out a call for aid to the government, requesting funds to salvage financially distressed companies, and a refinancing scheme to provide relief to affected shipowners. In October 2013, Malaysia Shipowners Association (Masa) Chairman Nordin Mat Yusoff said in a statement: 'We would like to appeal to the government to consider a relief or rescue fund to assist financially distressed firms as well as a refinancing scheme to help companies trapped with distressed assets.' With five of the 10 listed local shipping companies either delisted or placed under PN17 financial distress position in the last few years, the country's shipping industry is facing 'extinction', Yusoff said, whilst urging the government to intervene.

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