Exports slipped by -2.9% YoY in Aug (Jul: +3.1% YoY), faring worse than consensus expectations of a +4.9% YoY increase. The fall was contributed by weaker commodity and manufactured-related exports. Meanwhile, imports continued to contract, albeit by a smaller magnitude (-6.5% YoY; Jul: -8.7% YoY), following a pickup in consumption imports. Consequently, the trade surplus was lower at RM13.2bn (Jul: RM25.2bn).

DATA HIGHLIGHTS

Exports slipped by -2.9% YoY in Aug (Jul: +3.1% YoY), far below the consensus estimate of +4.9% YoY. Imports remained in contractionary phase, albeit at a smaller rate of -6.5% YoY (Jul: -8.7% YoY). On a monthly basis, exports and imports fell by - 14.5% (Jul: +11.8%) and -2.2% (Jul: +8.7%) respectively, resulting in a smaller trade surplus of RM13.2bn (Jul: RM25.2bn).

Of the major export markets, positive growth was seen for exports to China (+20.9% YoY; Jul: +13.9% YoY) and US (+13.6% YoY; Jul: +28.6% YoY), while exports to EU (-4.3% YoY; Jul: +3.4% YoY), ASEAN (-8.0% YoY; Jul: +0.2% YoY) and Japan (- 13.8% YoY; Jul: -2.8% YoY) were lower for the month, due possibly to weaker recovery from Covid-19.

Commodity-related exports declined by -5.1% YoY (Jul: +8.3% YoY), mainly due to a sharper drop in exports of LNG (-49.1% YoY; Jul: -47.6% YoY) and petroleum products (-15.9% YoY; Jul: -6.5% YoY), as well as sharp slowdown in palm oil products (+0.4% YoY; Jul: +52.0% YoY). The decline was cushioned by rubber products, which continued to record strong double-digit growth (+66.8% YoY; Jul: +93.9% YoY). Meanwhile, crude petroleum exports were unchanged (0% YoY; Jul: - 4.9% YoY).

Manufactured exports also declined (-2.3% YoY; Jul: +1.9% YoY) on the back of weaker exports of metal (-30.7% YoY; Jul: -5.9% YoY), chemical (-23.4% YoY; Jul: - 23.2% YoY) and machinery exports (-11.3% YoY; Jul: -4.5% YoY), alongside continued moderation in E&E exports (+7.6% YoY; Jul: +9.2% YoY). This offset the surge in optical & scientific equipment exports (+28.6% YoY; Jul: +9.9% YoY) due possibly to strong health-related demand.

Imports contracted by a smaller magnitude of -6.5% YoY (Jul: -8.7% YoY), supported by positive growth in consumption imports (+2.9% YoY; Jul: +0.1% YoY). This was driven by higher imports of durables, especially parts of machinery and mechanical appliances. Meanwhile, intermediate (-5.6% YoY; Jul: -17.3% YoY) and capital imports (-15.5% YoY; Jul: -19.8% YoY) continued to decline which suggest continued weakness in investment activity in the short-term. Intermediate imports were dragged by lower imports of processed industrial supplies, particularly iron and steel, while capital imports mainly fell on parts of machinery and mechanical appliances.

HLIB’s VIEW

On the global front, international trade flows remained weak in early Aug. According to UNCTAD’s tracking of container ship port calls, a proxy for global trade, port calls were still 3.0% below their 2019 levels at the global level. By region, North America and Europe were below 2019 port calls, South East Asia had almost matched its 2019 levels, while port calls in China and Hong Kong already surpassed their 2019 values. This divergence in port call patterns across regions highlights the fragility of recovery in global demand, and this fragility could be further exacerbated by re imposition of lockdown in some countries. Maintain 2020 GDP at -5.0%.

Source: Hong Leong Investment Bank Research - 29 Sept 2020