Massive decline in exports despite higher import growth – Exports widened its contraction to -6.8% y-o-y in Sept’19 from -0.8% y-o-y in Aug’19. However, imports returned to the black to +2.4% y-o-y in Sept’19 (vs Aug’19: -12.6% y-o-y) after registered sturdy losses for three consecutive months. Exports were substantially below our in-house and market forecast while imports were the opposite. Massive decline in exports during this period was due to lower production of all main sectors such as manufacturing, mining and agriculture. Meanwhile, imports were underpinned by stellar imports of all of its components which included intermediate, capital and consumption goods. Therefore, the nation's trade surplus in Sept’19 dropped single-digit growth to RM8.3b from RM10.9b in Aug’19, which tumbled -46.5% y-o-y and - 23.8% m-o-m.

Slump in export of manufacturing outputs – Export of Manufacturing goods, which constituted 85.4% of total exports, fell to contraction, -5.8% y-o-y in Sept’19 after registered a little growth of +0.8% y-o-y in the previous month. Contraction in manufacturing outputs was due to slower exports in E&E products (-12.2% y-o-y vs Aug ’19: -7.4% y-o-y), Chemicals & chemical products (-11.5% y-o-y vs Aug ’19: -4.5% y-o-y) and by Petroleum products (-13.4% y-o-y vs Aug ’19: +7.0% y-o-y). However, higher exports growth in Machinery, Appliances & Parts (+6.9% y-o-y vs Aug ’19: +7.9% y-o-y), Manufacture of metal (+4.8% y-o-y vs Aug ’19: +19.3% y-o-y) and Optical & Scientific Equipment (+12.8% y-o-y vs Aug ’19: - 11.5% y-o-y) failed to offset the contraction in Exports of manufacturing outputs.

Export of agriculture goods depleted again; mining goods still contracted – Export growth of Agriculture outputs was back to the red, falling to -8.3% y-o-y during Sept’19 after soaring in the previous month (Aug’19: +13% y-o-y). Disappointing export of agriculture products was due to slower exports for both Palm oil products (-9.4% y-o-y vs Aug ’19: +23.3% y-o-y) and Rubber products (-2.4% yo-y vs Aug ’19: 2.4% y-o-y). Mining wise, exports of Mining outputs remained sluggish as the growth depleted to -15.2% y-o-y in Sept’19 (vs Aug’19: -20.7% y-o-y) following disappointing exports of LNG products (-1.9% y-o-y vs Aug’19: -11.2% y-o-y) due to lower volume and average unit value.

Subdued trade performances with key trading nations – Exports to ASEAN dropped -8.6% y-o-y while imports from ASEAN contracted -7.4% y-o-y during Sept’19 following slower trade with Singapore (Exports: -11.7% y-o-y; Imports: -16.0% y-o-y) and Thailand (Exports: -4.3% y-o-y; Imports: -9.2% y-oy). Despite slower exports with Indonesia (-11.8% y-o-y), imports from Indonesia were higher at +5.4% yo-y. The lower exports of ASEAN countries were mainly due to E&E products. Besides that, exports with China also dropped, -3.0% y-o-y whilst imports grew at +9.7% y-o-y.

Stellar Imports – Import posted a stellar growth by +2.4% y-o-y in Sept’19 after down for three consecutive months, thanks to higher imports of all components. Import of Intermediate goods was the massive contributor for imports, soaring 11.1% y-o-y (vs Aug’19: -13.9% y-o-y) following higher imports of mineral fuels and oils. Besides, Capital goods rose 7.3% y-o-y in Sept from -12.8 y-o-y in Aug’19, banking on higher imports of parts of electrical machinery and equipment. Moreover, Consumption gained 15.1% yo-y in Sept’19 from sharp decline of -30.8% y-o-y during the prior month, thanks to higher imports of plastics and articles.

Possible contractions for both exports and imports in 2019 – Following the contraction in first nine months for both exports and imports (-1.1% y-o-y and -3.3% y-o-y respectively), we reckon that exports and imports to register negative growths in 2019 (vs 2018: Exports: +6.8% y-o-y, Imports: +4.9% y-o-y) amid prevailing trade war between the US and China as well as slowing global economic activities. Besides, we also anticipate trade performance during the last quarter of the year will remain low due to high base effect.

Source: JF Apex Securities Research - 5 Nov 2019