Malaysia's trade numbers for November will remain strong but mainly due to valuation effects

Malaysia's trade numbers for November will remain strong but mainly due to valuation effect. Headline export growth is expected to post a 16.8% YoY surge. This will be a tad stronger than the previous month's figure of 16.7%. This will be the sixth consecutive month of increase. Imports will likely expand by 16.2% YoY, which will bring about a trade surplus of 13.2bn in the month. 

"Export performance may appear encouraging given an otherwise uncertain external environment and dicey domestic political conditions, it is largely currency effect at play", notes DBS Group Research.

The ringgit has weakened sharply against the USD compared to a year ago. And domestic trade data are cited in local currency terms while most international trade are quoted in USD terms. So, for every one dollar of exports, exporters are now getting more in local currency basis. This is merely due to the steep depreciation of the ringgit. 

However, that doesn't imply that global demand has picked up or that the amount/volume of exports has risen. It's simply currency effect. Indeed, the picture will look very different if the trade data are converted into USD term. That is, while the headline export number may appear encouraging, it doesn't necessary imply that global demand is picking up. One has to take into account the currency valuation effect.