Contraction in growth – Exports and imports for the month of Mar’20 contracted to -4.7% y-o-y (vs Feb’20: +11.8% y-o-y) and -2.7% y-o-y (vs Feb’20: +11.3% y-o-y) respectively. The results were substantially below our in-house estimate but exceeded consensus expectation. For exports, subdued growth was dented by disappointing exports of sub-sectors namely manufacturing, mining and agriculture. Meanwhile, imports were deteriorated by subdued imports of capital goods which offset improved imports growth of intermediate and consumption goods. As such, the nation's trade surplus in Mar’20 stood at RM12.4b, decreasing -14.2% y-o-y and -2.2% m-o-m. As for first quarter of 2020, exports grew +1.9% yo-y (vs 1Q19: -1.3% y-o-y) while imports rose +2.1% y-o-y (vs 1Q19:-3.0% y-o-y) which brought the total trade growth to +1.9% y-o-y (vs 1Q19:-2.1% y-o-y).

Disappointing exports of manufacturing goods… – Export of Manufacturing goods (84.4% from total exports) depleted to -4.5% y-o-y during Mar’20 after posted a stellar growth of +13.1% y-o-y in prior month following massive contraction of its major component which is E&E products (-13.9% y-o-y vs Feb’20: -2.7% y-o-y). On the same note, other exports of manufacturing components also lower such as Chemicals & chemical products (-5.1% y-o-y vs Feb’20: +9.6% y-o-y), Machinery, equipment & parts (- 17.6% y-o-y vs Feb’20: +23.0% y-o-y), Manufactures of metal (-22.2% y-o-y vs Feb’20: +13.3% y-o-y) as well as Optical & scientific equipment (-9.1% y-o-y vs Feb’20: +50.9% y-o-y). Nevertheless, exports of Petroleum products were higher to +22.7% y-o-y during this period from +17.0% y-o-y in Feb’20. For 1Q20, exports of manufactured goods grew +2.5% y-o-y in view of higher exports of petroleum products, transport equipment and iron & steel products.

….as well as exports of mining and agriculture goods – Export of Mining extended its negative growth to -4.4% y-o-y in Mar’20 from -3.0% y-o-y in Feb’20 following massive drop in LNG (-13.0% y-o-y vs Feb’20: +7.1% y-o-y) and crude petroleum. For exports of Agriculture, it returned to the red, -5.0% yo-y after growing higher at +15.8% y-o-y in prior month due to drop in Palm oil and palm oil based agriculture products (-0.3% y-o-y vs Feb’20: +17.1% y-o-y). During 1Q20, exports of mining contracted - 10.4% y-o-y in view of lower exports of LNG. Nevertheless, exports of agriculture products rose +1.3% yo-y, buoyed by massive exports of palm oil and palm oil-based agriculture products.

Exports to ASEAN remained steady despite slower imports; subdued trade with the US – Exports to ASEAN remained steady at +3.0% y-o-y, thanks to higher exports to Singapore (+8.6% y-o-y), Indonesia ( +100.5% y-o-y), Philippines (+15.0% y-o-y) and Myanmar (+38.9% y-o-y) following higher exports of petroleum products, transport equipment and iron and steel products. However, imports slid - 15.7% y-o-y. Meanwhile exports and imports with the US dropped -3.6% y-o-y and -5.3% y-o-y respectively in view of soft demand in optical and scientific equipment, E&E products, transport equipment as well as iron and steel products. Meanwhile, both China and Japan recorded contraction in exports of - 6.1% y-o-y and -0.5% y-o-y despite higher imports of +1.2% y-o-y and +8.8% y-o-y respectively.

Massive drop in capital goods imports – Imports contracted -2.7% y-o-y, no thanks to massive drop in capital goods (-47.5% y-o-y vs Feb’20:-16.9% y-o-y) in view of aircraft and parts. However, both intermediate and consumption goods rose +2.0% y-o-y and +7.0% respectively arising from higher imports of primary fuel and lubricants (mineral fuels and oils) and processed food & beverages mainly for household consumption (meat).

Subdued trade growths for 2020 – We expect trade activities for April’20 will remain in negative trajectory as Malaysia still imposes movement control order (MCO) due to Covid-19 pandemic. However, we expect trade performance to recover slightly in May’20 as most business activities start to operate as government has eased the MCO. 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 - 5 May 2020