The Covid-19 pandemic, which caused major disruptions to the global supply chain, has dragged both exports and imports. The poor showing is expected as most countries around the world were under some form of lockdown to contain the spread of Covid-19, and this has caused major disruptions to manufacturing activities and the movement of goods globally.

Looking ahead, there are signs that exports could improve partly due to the government having allowed more industries to resume operations with some at full operating capacity since 4 May 2020. At the same time, support should come from the modest recovery in semiconductors. Besides, companies in other countries are also ramping up their business operations. This is reflected in the improvement in May’s PMI which acts as an early indication that the economic downturn caused by the Covid-19 pandemic could start to bottom out.

• Following a blip into a trade deficit of RM3.5bil in April which ended a streak of 269 consecutive months of surplus, trade performance in May returned to a surplus of RM10.4 billion. The surplus was due to a slower pace of decline in exports, which slid by 25.5% y/y to RM62.7 billion compared to imports which fell by 30.4% y/y to RM52.3 billion. This brings the average exports and imports for the first five months of 2020 to -8.8% y/y and -6.4% y/y, respectively.

• Exports of manufactured goods shrank 23.5% y/y from -13.8% y/y in April. The drag on manufactured exports was a result of the poor performance from E&E products, petroleum products, manufactures of metal, chemical and chemical products and machinery, equipment and parts.

• However, exports of rubber products especially rubber gloves registered a double-digit growth for two consecutive months — up 20.5% or RM461mil in May 2020. It benefitted from the pandemic.

• Agriculture exports contracted by 21.3% y/y from -13.8% y/y in April. It was dragged by sawn timber and moulding, sawlog, natural rubber, palm oil and palm oil-based products and other agriculture products. Meanwhile, mining exports dived by 49.1% y/y from -31.6% y/y in April, weighed down by the slower demand of crude petroleum.

• Imports fell across the board. Capital goods declined markedly by 27.8% y/y from +68.9% y/y in April due mainly to lower imports of capital goods (except transport equipment), particularly machinery, mechanical appliances and parts.

• Intermediate goods dropped by 27.8% y/y from -30.6% y/y in April due to lower imports of processed industrial supplies, particularly plastics and articles. Meanwhile, consumption goods tumbled by 21.9% y/y compared to -12.1% y/y in April on account of lower imports of semi-durable goods, particularly footwear.

• The Covid-19 pandemic, which caused major disruptions to the global supply chain, has dragged both exports and imports. The poor showing of exports and imports is expected as most countries around the world were under some form of lockdown to contain the spread of Covid-19, and this has caused major disruptions to manufacturing activities and the movement of goods globally.

• Looking ahead, there are signs that exports could improve partly due to the government having allowed more industries to resume operations with some at full operating capacity since 4 May 2020. At the same time, support should come from the modest recovery in semiconductors. Besides, companies in other countries are also ramping up their business operations. This is reflected in the improvement in May’s PMI which acts as an early indication that the economic downturn caused by the Covid-19 pandemic could start to bottom out.

Source: AmInvest Research - 30 Jun 2020