Exports continued to deteriorate for the second consecutive month in September. It fell to a near three-year low by 6.8% y/y from -0.8% y/y in August (consensus: -0.1%). The drag came from manufactured goods, added with commodity-based manufactured goods, plus resource-based. However, imports grew 2.4% y/y in September from -12.5% y/y in August supported by positive growth across the board.

The ongoing external headwinds, added with the global semiconductors’ down cycle and volatile commodity prices imply that the upside to our exports growth remains limited. Thus, we reiterate our base-case GDP growth of 4.5% with the upside at 4.7% for 2019.

• Exports continued to deteriorate for the second consecutive month in September. It fell to a near three-year low by 6.8% y/y from -0.8% y/y in August (consensus: -0.1%). The drag came from manufactured goods, down by 5.8% y/y in September (+0.1% y/y in August) as a result of poor showing from electrical & electronic (E&E) which reported a drop of 12.2% y/y (-7.4% y/y in August) – the lowest since February 2013. Also, commodities-based exports like refined petroleum products fell by 14.7% y/y (+7.1% y/y in August) and chemicals & chemical products by 11.5% y/y (-4.5% y/y in August).

• Besides, resource-based exports remained depressed. Mining exports fell by 15.2% y/y in September following weaker crude petroleum shipments, down 45.8% y/y in September from -40.2% y/y in August. Agricultural goods dropped by - 8.3% y/y in September due to poor palm oil exports (-9.3% y/y in September versus +31.5% y/y in August) August hurt by lower palm oil export volume (-12.9% y/y from +57.8% y/y in August).

• Looking at the demand from our trading partners, exports to China fell 3.0% y/y in September from 2.8% y/y in August, reflecting the softening Chinese domestic demand. Likewise, shipment declined to Singapore (-11.7% y/y); Japan (-1.7% y/y); and Hong Kong (-26.5% y/y). In contrast, exports to the US continued to expand albeit at a softer pace of 6.6% y/y from 6.8% y/y in August. Exports to the US continued to be supported by E&E products, wood products, manufactures of metal, non-metallic mineral products as well as transport equipment.

• As for imports, the low base saw imports grew 2.4%y/y in September from -12.5% y/y in August. Details of imports showed that all import components rose in September. Capital goods climbed 7.3% y/y (-30.9% y/y in August) while intermediate goods gained 11.1% y/y (-13.8% y/y in August); and consumption goods were stronger by 15.1% y/y (-12.8% y/y in August).

• On the whole, for the month of September, trade surplus narrowed to RM8.3bil from RM10.9bil in August. Year to date, exports fell by 1.2% while imports contracted by 3.3% y/y. The ongoing external headwinds, added with the global semiconductors’ down cycle and volatile commodity prices imply that the upside to our exports growth remains limited. Thus, we reiterate our base-case GDP growth of 4.5% with the upside at 4.7% for 2019.

Source: AmInvest Research - 5 Nov 2019