Widening contraction – April’s exports registered a massive contraction of -23.8% y-o-y, substantially worse than ours and market expectation. On the same note, imports also tumbled to -8.0% y-o-y during Apr’20, slightly below our in house-forecast but greater than market expectation. Upon that, trade balance recorded deficit value of RM3.5b for the first time since Asian Financial Crisis 1997/1998 arising from lockdown during Covid-19 pandemic which led to overall supply chain disruption. Disappointing export was due to sharp decline in mining sector and followed by manufacturing and agriculture sectors. Meanwhile, import was deteriorated by contraction of intermediate and consumption imports goods despite soaring capital imports goods.

Exports of manufacturing outputs extended contraction… – Export of Manufacturing outputs which was the main contributor for overall exports (85.5%) extend its contraction from -4.5% y-o-y during Mar’20 to -23.4% y-o-y during Apr’20 following slower exports of most of its components such as E&E products (-21.7% y-o-y vs Mar’20: -13.9% y-o-y), Chemicals & chemical products (-18.2% y-o-y vs Mar’20: -5.1% y-o-y), Petroleum products (-23.2% y-o-y vs Mar’20: +22.7% y-o-y), Machinery, equipment & parts (-53.3% y-o-y vs Mar’20: -17.6% y-o-y), Manufactures of metal (-54.2% y-o-y vs Mar’20: -22.2% y-o-y) and Optical & scientific equipment (-34.8% y-o-y vs Mar’20: -9.1% y-o-y). Nevertheless, exports of Iron & steels (+21.5% y-o-y) as well as Rubber products (+11.7% y-o-y) were robust during this period.

….as well as exports of mining and agriculture outputs – Export of Mining registered a massive contraction during Apr’20, tumbling -31.6% y-o-y from -4.4% y-o-y during prior month in view of contraction in LNG (-20.5% y-o-y vs Mar’20: -13.0% y-o-y) coupled with crude petroleum. Moreover, exports of Agriculture also posted a lackluster exports growth of -13.8% y-o-y (vs Mar’20: -5.0% y-o-y) due to slower exports of palm oil and palm oil-based agriculture products (-1.5% y-o-y vs Mar’20: -0.3% yo-y).

Subdued trade with key trading partners – Exports to ASEAN tumbled heavily to -24.1% y-o-y (vs Mar’20: +3.0% y-o-y) as most of the countries were having some forms of lockdown due to pandemic. Therefore, trade with regional countries were lower such as Singapore (exports:-16.3% y-o-y; imports:- 35.9% y-o-y), Thailand (exports:-37.9% y-o-y; imports:-46.8% y-o-y) and Indonesia (exports:-2.3% y-o-y; imports:-22.5% y-o-y) following slower trade of E&E products, crude petroleum, machinery equipment, petroleum products as well as manufacture of metal. However, exports with China were grown +4.2% y-oy (vs Mar’20: -6.0% y-o-y) as China has easing their lockdown and start to operate business activity. Higher exports with China were underpinned by exports of iron & steel, E&E products and crude petroleum. However, imports were slower by -6.0% y-o-y (vs Mar’20: +1.7% y-o-y).

Higher imports of capital goods failed to offset overall contraction – Imports slumped -8.0% y-o-y (vs Mar’20: -2.7% y-o-y) due to sharp decline in intermediate and consumption growth despite stellar capital goods. Heavy decline in intermediate goods (-30.6% y-o-y vs Mar’20: +2.0% y-o-y) was due to lower imports of electrical, machinery, equipment & parts. Moreover, consumption also sluggish (-12.0% yo-y vs Mar’20: +7.0% y-o-y) given gloomy imports of jewellery. However, capital imports growth soared to +68.9% y-o-y, underpinned by floating structures goods.

Subdued trade growths for 2020 – We expect trade activities for May’20 to ease its contraction as most business activities started to operate and run at full capacity as government has eased the movement control order (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 Jun 2020