Massive rebounds for exports and imports – Feb’20 exports and imports rebounded from contraction, soaring +11.8% y-o-y and +11.3% y-o-y respectively from -1.5% y-o-y and -2.5% y-o-y during the previous month. Both results were substantially above our in-house and market expectation. Exports growth was underpinned by stellar exports growths in Manufacturing and Agriculture outputs despite diminished Mining output. Meanwhile, imports growth was buoyed by Intermediate and Consumption outputs. Therefore, the nation's trade surplus in Feb’20 stood at RM12.6b, growing +14.1% y-o-y and +5.2% m-o-m.

Stellar exports of manufacturing goods despite subdued E&E exports – Export of Manufacturing goods which was the main exports components (84.8%) improved +13.1% y-o-y (vs Jan’20:+1.1% y-o-y), thanks to higher sub-components exports such as Chemicals & chemical products (+9.6% y-o-y vs Jan’20:- 17.7% y-o-y), Petroleum products (+17% y-o-y vs Jan’20:+46.4 % y-o-y), Machinery, equipment & parts (+23% y-o-y vs Jan’20:+5.7 % y-o-y), Manufactures of metal (+13.3% y-o-y vs Jan’20:-2.8 % y-o-y) and Optical & scientific equipment (+50.9% y-o-y vs Jan’20:-0.1 % y-o-y). However, exports of E&E products were subdued, -2.7% y-o-y during Feb’20 as compared to -5.4% y-o-y during Jan’20.

Export of mining narrowed its contraction; agriculture regained its momentum – Export of Mining narrowed its contraction to -3.0% y-o-y during Feb’20 from massive contraction of -20.1% y-o-y during Jan’20 following drop in export of crude oil. However, export of LNG was higher to +7.1% y-o-y (vs Jan’20: -22.8% y-o-y). Nevertheless, Exports of Agriculture registered a higher growth of +15.8% y-o-y during this period from contraction of 4.2% y-o-y in the previous month. Agriculture output has recorded negative trajectory for five consecutive months. Rebound in agriculture export growth was spurred by Palm oil and palm oil based agriculture products (+17.1% y-o-y vs Jan’20: +0.5% y-o-y) and Rubber products (+16.8% y-o-y vs Jan’20: +10.7% y-o-y)

Steady trades with key trading partners – Exports to ASEAN were robust, up +10.0% y-o-y in Feb’20 (vs Jan’20:-4.6% y-o-y) following stellar exports with most of the countries such as Singapore (+22.5% yo-y), Indonesia (+21.6% y-o-y), Philippines (+34.3) in view of higher exports of petroleum products, chemical & chemical products and iron & steel products. However, imports with ASEAN slightly dropped to - 1.2% y-o-y. On the same note, exports and imports with China also increased +11% y-o-y and +6.5% y-oy respectively following steady exports of iron & steel products, optical & scientific equipment, manufacturer of metal as well as palm oil & palm oil based agriculture products.

Imports buoyed by Intermediate and Consumption goods – Imports expanded +11.3% y-o-y (vs Jan’20: -2.5% y-o-y) in view of higher imports of intermediate and consumption goods despite slower capital goods. Intermediate outputs which was the main imports components (62.1%), improved to +20.4% y-o-y arising from higher import of parts of electrical machinery & equipment. Moreover, Consumption outputs also soared 10.1% y-o-y in view of stellar imports of processed food & beverages particularly meat. However, capital goods depleted -16.9% y-o-y due to slower imports of parts of machinery & mechanical appliances.

Subdued trade growths for 2020 – We expect trade activities for the next few months will be in negative trajectory following Covid-19 pandemic coupled with Malaysia’s MCO imposed by government which halted most of the business activities. For 2020, we expect trade performance will be challenging as it is being dampened by Covid-19 virus outbreak in the worldwide. We foresee both global supply disruption and dampened demand no thanks to the pandemic, thus lowering global growth activities and affecting our nation’s trade performance.

Source: JF Apex Securities Research - 6 Apr 2020