Both export and import are still in contraction – Exports registered a smaller contraction of -5.5% yo-y in Nov’19 as compared to -6.7% y-o-y in Oct’19 and this came below our in-house and consensus expectations. The subdued export was due to contraction in all of its sub-sectors mainly Agriculture. On the same note, imports posted a decline of -3.6% y-o-y in Nov’19 (vs Oct’19:-8.7% y-o-y) due to contraction in Capital goods. Imports’ performance in Nov’19 was slightly better than the market’s forecast but below our in-house forecast. As a result, the nation's trade surplus in Nov’19 registered a single-digit growth to RM6.5b which translates into -23.1% y-o-y and -62.5% m-o-m.

Export of manufacturing goods narrowed its contraction – Export of Manufacturing goods, the main contributor to total exports, is still in contraction but narrowed to -2.8% y-o-y in Nov’19 from -4.5% y-o-y in Oct’19. The decline in manufacturing outputs was deteriorated by slower growth in E&E products (- 11.6% y-o-y vs Oct ’19: -3.2% y-o-y), Chemicals & chemical products (-5.1% y-o-y vs Oct ’19: -12.7% y-oy), Petroleum products (-17.2% y-o-y vs Oct ’19: -28.4% y-o-y) and Manufacture of metal (-2.5% y-o-y vs Oct ’19: -20% y-o-y) which offset stellar growth in Machinery, Appliances & Parts (+6.2% y-o-y vs Oct ’19: +3.5% y-o-y) and Optical & Scientific Equipment (+11.9% y-o-y vs Oct ’19: +17.6% y-o-y).

Export of agriculture outputs in the red for four consecutive months; mining goods extended double digit contraction – Export of Agriculture outputs was -4.2% y-o-y from -8.9% y-o-y, due to lower export of Palm oil products (-3.5% y-o-y vs Oct ’19: -9.5% y-o-y) mainly palm keener oil (-34.3% yo-y). However, export of rubber products were higher by +1% y-o-y (vs Oct’19:-11% y-o-y). Mining extended its contraction to -28.7% y-o-y (vs Oct’19:-24.6% y-o-y) due to subdued exports in LNG (-35.9% y-o-y vs Oct ’19: -17.1% y-o-y) following lower volume and average unit value.

Less trade with ASEAN while China and US remains steady – Exports to ASEAN were slower in Nov’19, having widened its contraction to -8.8% y-o-y (vs Oct’19: -2.8% y-o-y). Meanwhile, decline in imports also eased to -9.6% y-o-y in Nov’19 from -10.7% y-o-y in Oct’19. Among ASEAN countries which reported slower trade growth during Nov’19 are Singapore (Exports:-12.5% y-o-y; Imports: -9.1% y-o-y) and Thailand (Exports:-14.6% y-o-y; Imports: -7.3% y-o-y). However, trade with China (+4.1% y-o-y and +11.5% y-o-y respectively for both export and import) and the US (+6.5% y-o-y and +16.1% y-o-y respectively) are strong during this period.

Imports bogged down by Capital goods – Imports were down -3.6% y-o-y in Nov’19 from -8.7% y-o-y in Oct’19 due to slower imports of capital outputs. Capital goods declined 4.3% y-o-y (vs Oct’19: -11.5% yo-y) due to slower imports of aircraft and parts. However, Consumption and Intermediate goods were higher by +1.9% y-o-y and +1.8% y-o-y respectively in view of higher imports of fish & crustaceans as well as parts of electrical machinery & equipment.

Contractions in both exports and imports in 2019; expect positive growth for 2020 – Following the contraction in first eleven months for both export and import (-1.8% y-o-y and -3.7% y-o-y respectively), we reckon that export and import will 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 to remain low due to high base effect. However, we believe exports and imports to show a positive trajectory growth albeit in a modest most, underpinned by positive deal between US and China on the trade war as well as recovery on the commodity price and healthy business growth.

Source: JF Apex Securities Research - 6 Jan 2020