As expected, exports continued to perform poorly. October’s export reading fell by 6.7% y/y – the third consecutive month reporting a decline. At the same time, imports fell across the board. In October, imports contracted by 8.7% y/y. Thus, the trade surplus in October came in at RM17.3bil.

Going forward, with the ongoing external headwinds and down cycle in global semiconductors plus softer commodity prices, we expect our exports to face stiff challenges. For the full year of 2019, exports are likely to hover within the contraction region of -1.5% to -1.7%. With domestic activities expected to continue supporting growth, we maintain our 2019 GDP growth at 4.5% with an upside of 4.7%.

• As expected, exports continued to perform poorly. October’s export reading fell by 6.7% y/y – the third consecutive month reporting a decline. Besides, over the 10 months of 2019, the total number of times exports reported negative growth was 6. This brings the average exports growth for the first 10 months of 2019 to -1.8%.

• Poor exports were due to the drag across the board. In particular, manufacturing exports which account for 85% of total exports fell by 4.5% y/y due to the poor showing from the E&E segment which was hurt by the down cycle of global semiconductors. Besides, both mining and agriculture products fell by 24.6% y/y and 8.9% y/y respectively.

• At the same time, imports fell across the board. In October, imports contracted by 8.7% y/y. Capital imports fell 11.5% y/y while intermediate import was down 5.1% y/y and consumption imports by 5% y/y. The fall in capital and intermediate imports implies the outlook for the manufacturing sector remains challenging. Thus, it is expected to weigh on job opportunities given that the manufacturing sector provides close to 20% of the total jobs in the market.

• On the direction of exports, our exports to China dropped for the third straight month, indicating the ongoing trade war is taking a toll. Although our exports to the US are positive, it is moderating. Furthermore, our export exposure to key Asean countries is also weak.

• Going forward, with the ongoing external headwinds and down cycle in global semiconductors plus softer commodity prices, we expect our exports to face stiff challenges. However, the economy is likely to report a healthy trade surplus just like in October, of a surplus amounting RM17.3bil following a bigger collapse in imports than exports. For the full year of 2019, exports are likely to hover within the contraction region of -1.5% to -1.7%. With domestic activities expected to continue supporting growth, we maintain our 2019 GDP growth at 4.5% with an upside of 4.7%

Source: AmInvest Research - 5 Dec 2019