PETALING JAYA: Malaysia’s external trade momentum remains supported by robust global demand for electrical and electronic (E&E) products, driven by artificial intelligence-related hardware, 5G/6G infrastructure, Internet of Things and electric vehicle components.
Kenanga Investment Bank Bhd (Kenanga IB) said the strong trade performance aligns with the global tech upcycle and rising global semiconductor sales.
It said the Semiconductor Industry Association projects global semiconductor sales to reach a record US$1 trillion (RM3.9 trillion) in 2026, after growing 25.6% year-on-year to US$791.7 billion in 2025.
“This provides a significant tailwind for Malaysia. If current momentum holds, there is room to upgrade our export forecast,“ Kenanga IB said in a report.
Malaysia’s trade sector kicked off 2026 on a strong footing, with total trade rising 12.6% year-on-year to RM272.4 billion in January, the highest level ever recorded for the month since 1990.
The increase from RM242 billion a year earlier was driven by robust growth in exports and imports, alongside a sharp expansion in the trade surplus, the Statistics Department said.
Exports growth accelerated sharply to 19.6% in January from 10.2% in December, the fastest pace in 40 months and well above Kenanga IB’s 14.8% and consensus’s 14.3% expectations.
Malaysia’s exports were supported by a firm rebound in demand from China and broader East Asia, with E&E products continuing to anchor growth. Shipments to China rose 16.1%, reversing December’s decline, while Singapore returned to marginal growth at 0.4%.
Exports to the US remained strong at 33.9% despite moderating from the prior month, and the European Union sustained elevated growth at 26% even as momentum eased, while the contraction to Japan narrowed sharply.
Exports to other East Asian markets accelerated markedly, led by Taiwan, Hong Kong and South Korea.
Sectorally, manufacturing expanded 22.3% to a 40-month high, while mining returned to positive territory, offsetting continued weakness in agriculture.
By product, E&E exports surged 39.5%, also reaching a 40-month high, and accounted for 48.0% of total exports despite easing slightly in value to RM70.5 billion from December’s peak.
In contrast, commodity-related exports remained soft, particularly palm oil and palm-based products, liquefied natural gas and crude petroleum.
Imports slowed to 5.3% year-on-year, below consensus expectations but above internal forecasts, as a surge in re-exports was offset by a decline in retained imports.
Growth in consumption goods moderated, while intermediate and capital goods contracted, contributing to a 4.0% month-on-month pullback after four consecutive months of expansion.
Kenanga IB said overall trade rose 12.6% year-on-year to a three-month high, although it slipped on a monthly basis, and the trade surplus narrowed slightly to RM21.4 billion, still ahead of expectations.
Touching on risks, the investment bank said uncertainty remains around US tariffs and the impact of Trump-era policies on global supply chains, though risks appear less severe than initially feared.
Commodity-related exports remain vulnerable to geopolitical tensions, supply disruptions and uneven global demand.
China’s uneven recovery also poses downside risk.
On the flipside, earlier global monetary easing, ongoing fiscal support, and the strengthening global tech cycle could cushion the downside, Kenanga IB noted.
“Malaysia’s better-than-expected 2025 gross domestic product (GDP) growth of 5.2%, alongside solid fourth-quarter 2025, with performance standing at 6.3%, should support momentum into the first half of 2026.
“A favourable base effect and resilient domestic demand will also underpin growth. However, external risks persist. “We maintain our 2026 GDP growth forecast at 4.5%, with a potential upgrade to 5% if current momentum continues,“ Kenanga IB said.
The Sun Malaysia
