Negative starts for both exports and imports – Jan’20 exports contracted -1.5% y-o-y, substantially below our in-house forecast but marginally above consensus forecast. Meanwhile, imports deteriorated - 2.4% y-o-y which exceeded our in-house and market forecast. Disappointing exports growth was dented by massive decline in Mining goods as well as Agriculture goods despite improved Manufacturing goods. On the same note, imports were dragged down by contraction in Capital and Consumption goods despite stellar Intermediate goods. Therefore, the nation's trade surplus in Jan’20 stood at RM12b, up +4.3% y-o-y but down -4.6% m-o-m.

Moderate Exports of manufacturing goods – Export of Manufacturing goods which constituted 84.4% of market share, rising +1.1% y-o-y during Jan’20, thanks to positive growths in Petroleum products (+45.8% y-o-y vs Dec’19:+36.2% y-o-y), Machinery, equipment & parts (+5.7% y-o-y vs Dec’19:+6.9% yo-y) and Optical & scientific equipment (+0.2% y-o-y vs Dec’19:+12.0% y-o-y). However, other manufactured exports growth was depleted such as E&E products (-5.4% y-o-y vs Dec’19:-5.4% y-o-y), Chemicals & chemical products (-17.7% y-o-y vs Dec’19:-7.7% y-o-y) and Manufactures of metal (-2.8% yo-y vs Dec’19:-2.2% y-o-y).

Massive contraction in export of mining; agriculture extended its negative growth – Export of Mining outputs registered a massive decline of -20.1% y-o-y in Jan’20 (vs Dec’19:-28.7% y-o-y) following contraction in exports of crude petroleum (-10.9% y-o-y vs Dec’19:-24.3% y-o-y) in view of weaker volume and average unit value. Moreover, exports of LNG also dropped to -22.8% y-o-y from -13.6% y-o-y during Dec’19. Exports of Agriculture wise, the segment extended its negative growth to -4.2% y-o-y in Jan’20 despite marginal growth in Palm oil and palm oil based agriculture products (+0.5% y-o-y).

Trades with ASEAN, China declined – Exports to ASEAN slid 4.6% y-o-y in view of slower exports to Thailand (-19.8% y-o-y), Vietnam (-16.7% y-o-y) and Brunei (-2.6% y-o-y). Nevertheless, exports to Singapore, Indonesia, and Myanmar rose +0.9% y-o-y, 10.8% y-o-y and +35.7% y-o-y respectively following higher exports in petroleum products. Imports wise, imports with ASEAN tumbled -5.4% y-o-y in view of E&E products, machinery, equipment and parts as well as chemicals and chemical products despite higher imports of petroleum products, palm oil and palm oil-based agriculture products as well as LNG. On the same note, China exports and imports also depleted -5.7% y-o-y and -10.6% y-o-y respectively owing to lower exports of LNG, metalliferous ores and metal scrap, chemicals and chemical products as well as E&E products and slower imports of petroleum products, machinery, equipment and parts as well as iron and steel products.

Imports weighed down by Capital and Consumption goods – Imports slipped to -2.4% y-o-y following disappointing imports of Capital goods (-15% y-o-y vs Dec’19: -10.9% y-o-y) and Consumption goods (-1% y-o-y vs Dec’19: +3.2% y-o-y) in view of slower imports of machinery & mechanical appliances as well as apparels and clothing accessories. However, imports of Intermediate goods were higher which grew +3.7% y-o-y in Jan’19 from +6% y-o-y in Dec’19 arising from higher imports of mineral fuels and oils.

Moderate trade growths for 2020 – For 2020, we expect both exports and imports to grow at slower paces as it is being dampened by prevailing Covid-19 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 Mar 2020