Exports growth slowed to +0.2% YoY in Oct after surging +13.6% YoY in Sep, but still fared better than consensus expectations of a -0.4% YoY decline. Growth slowed due to lower manufactured exports amid softer commodityrelated exports. Meanwhile, imports declined at a steeper pace (-6.0% YoY; Sep: -3.6% YoY) on lower capital and intermediate imports. Consequently, the trade surplus widened to RM22.1bn (Sep: RM21.9bn).

DATA HIGHLIGHTS

The growth in exports slowed to +0.2% YoY in Oct (Sep: +13.6% YoY), but still fared better than the consensus estimate of a -0.4% YoY decline. Meanwhile, imports declined at a steeper pace of -6.0% YoY (Sep: -3.6% YoY). On a monthly basis, exports (+2.4%; Sep: +12.4%) and imports (+2.9%; Sep: +1.6%) recorded positive growth, resulting in a slightly wider trade surplus of RM22.1bn (Sep: RM21.9bn).

Double-digit export growth was recorded for the fifth consecutive month to the US (+25.6% YoY; Sep: +22.1% YoY), mainly driven by rubber products, E&E products, wood products, machinery, equipment and parts as well as palm oil and palm oilbased agriculture products. Exports to China (+4.9% YoY; Sep: +41.9% YoY) and EU (+4.7% YoY; Sep: +28.6% YoY) have slowed significantly, while exports declined to ASEAN (-3.6% YoY; Sep: +6.7% YoY) and Japan (-6.0% YoY; Sep: -11.3% YoY).

Commodity-related exports slowed to +1.3% YoY (Sep: +6.8% YoY) as strong growth in rubber products (+127.3% YoY; Sep: +115.8% YoY) and palm oil & palm-based products (+46.5% YoY; Sep: +43.6% YoY) was partially offset by lower exports of LNG (-57.7% YoY; Sep: -52.2% YoY), crude petroleum (-44.8% YoY; Sep: +22.2% YoY) and petroleum products (-25.6% YoY).

Manufactured exports posted a slight decline (-0.1% YoY; Sep: +15.3% YoY) owing to the fall in chemical & chemical products (-16.1% YoY; Sep: +0.6% YoY), manufactures of metal (-10.1% YoY; Sep: -5.9% YoY) and optical & scientific equipment (-3.0% YoY; Sep: +6.2% YoY). Machinery, equipment & parts (+3.2% YoY; Sep: +5.0% YoY) and E&E products (+3.0% YoY; Sep: +33.0% YoY) also recorded more moderate growth.

Meanwhile, imports declined at a faster pace (-6.0% YoY; Sep: -3.6% YoY) amid continued contraction in capital imports (-17.1% YoY; Sep: -2.2% YoY) and intermediate imports (-6.1% YoY; Sep: -17.7% YoY), as well as moderation in consumption imports (+6.5% YoY; Sep: +11.2% YoY). Capital imports have been falling since July 2020, which points to sustained weakness in investment activity even as economic activity resumed amid looser lockdown measures

HLIB’s VIEW

On the global front, more timely indicators suggest that the rebound in trade has continued since the end of 3Q20. In October, The RWI/ISL Container Throughput Index, a measure of container traffic compiled by the Leibniz Institute for Economic Research and the Institute of Shipping Economics and Logistics rose to an all-time high of 122.6 (Sep: 119.7). However, the strength of trade recovery has varied as some regional economies recorded a dip in exports during the same month. Downside risks continue to cloud the recovery in overall trade activity owing to resurgence of Covid-19 cases and ensuing targeted lockdowns. Maintain 2020 GDP at -5.5% and 2021 at +6.5%.

Source: Hong Leong Investment Bank Research - 7 Dec 2020