Improved trade performance in Dec’19 – Exports and imports increased +2.7% y-o-y and +0.6% y-oy respectively in Dec’19 (vs Nov’19: Exports:-5.5% y-o-y; Imports: -3.6% y-o-y). Exports results exceeded ours and market expectations of -3.5% y-o-y and -2.5% y-o-y respectively. Meanwhile, imports results were above our in-house forecast but below consensus expectation. Higher exports were buoyed by Petroleum products (+36.5% y-o-y vs Nov’19: -16.2% y-o-y), Palm oils products (+34.2% y-o-y vs Nov’19: -3.5% y-o-y), Machinery, Appliances & Parts (+7.0% y-o-y vs Nov’19: +6.0% y-o-y), Optical & Scientific Equipment (+11.9% y-o-y vs Nov’19: +11.9% y-o-y),and Rubber products (+6.6% y-o-y vs Nov’19: +1.0% y-o-y). Meanwhile steady imports were underpinned by stellar growth in Intermediate and Consumption goods which grew +6.0% y-o-y and +3.2% y-o-y respectively (vs Nov’19: +1.8% y-o-y and +1.9% y-o-y). As such, the nation's trade surplus in Dec’19 stood at RM12.6b after increasing +14.8% y-oy and +90.3% m-o-m.

For the full year of 2019, both export and import tumbled to -1.7% y-o-y and -3.5% y-o-y respectively, slightly higher than our in-house forecast of -2.0% y-o-y and -3.7% y-o-y respectively. The disappointing trade performance was dented by weak exports in major sub-sectors namely manufacturing, mining and agriculture as well as moderate imports of capital goods. Despite subdued exports and imports, the nation's trade surplus in 2019 stood at RM137.4b, growing +11.1% y-o-y.

Export of manufacturing goods for 2019 dragged down by E&E products – Export of Manufacturing goods remained the largest contributor to total exports during 2019 with 84.6% (vs 2018:83.4%). Exports of manufacturing goods were dragged down by slower exports of E&E products (- 2.3% y-o-y) to key trading partners such as China, Hong Kong SAR, Singapore, Thailand and Germany. However, exports of other manufactured goods were higher, underpinned by Iron & steel products (+28.3% y-o-y), Processed foods (+12.1% y-o-y) and Optical & scientific equipment (+5.5% y-o-y).

Export of mining for 2019 tumbled to double-digit contraction; agriculture narrowed its negative growth – Export of Mining outputs turned to the red, -10.6% y-o-y during 2019 as compared to +16.15 y-o-y during 2018 due to lower exports of crude petroleum (-28.1% y-o-y) following weaker volume and average unit value which offset stellar growth in petroleum condensates & other petroleum oil (+80.8% y-o-y). For export of Agriculture, outputs narrowed its contraction from -17.6% y-o-y during 2018 to -3.3% y-o-y during 2019. Export of agriculture for 2019 was dented by lower exports of palm oil & palm oil based products (-3.6% y-o-y).

Trades with ASEAN, EU and Japan were subdued; whilst China and US were improved – Exports to ASEAN were slower during 2019 following lackluster trade with Singapore (Exports: -2.4% y-o-y; Imports: -13% y-o-y) and Thailand (Exports: -2.2% y-o-y; Imports: -9.2% y-o-y). On the same note, trade with EU and Japan also tumbled which were down -2.9% y-o-y and -7.3% y-o-y respectively for exports while contracted -7.0% y-o-y and -0.4% y-o-y respectively for imports. However, trade with China showed a little growth as exports and imports increased +0.3% y-o-y and +0.1% y-o-y respectively underpinned by higher exports of iron & steel products and imports of petroleum products. Besides, trade with US also higher (exports increased 5.5% y-o-y and imports rose +5.7% y-o-y) driven by strong outputs such as E&E products.

Imports weighed down by Capital goods – Imports were down -3.5% y-o-y during 2019 (vs 2018: +5.1% y-o-y) due to disappointing imports of Capital goods (-10.3% y-o-y). However, imports of capital goods and Consumption goods were higher by +1.5% y-o-y and +1.7% y-o-y respectively in view of higher imports of industrial supplies and pharmaceutical products.

Minor trade growths for 2020 – For 2020, we expect both exports and imports to grow at slower paces as it is being dampened by prevailing Wuhan virus outbreak. Despite ongoing positive deal between US and China on the trade war, we foresee rising concern on the outbreak as well as lower commodity prices could lead to slower global growth activities, thus affecting our nation trade performance in the near future.

Source: JF Apex Securities Research - 5 Feb 2020