Massive contraction – Both exports and imports for the month of May’20 posted a massive contraction of -25.5% y-o-y and -30.4% y-o-y respectively (vs Apr’20: exports;-23.8% y-o-y; imports -8.0% y-o-y) albeit easing movement control order (MCO) since 4th May (conditional MCO) with some business sectors were allowed to resume their operations as usual with strict Standard Operating Procedures (SOPs). The results were substantially worse than our in-house and market expectation. However, trade surplus stood at RM10.4b, growing +14.7% y-o-y and rebound from trade deficit of RM3.5b in prior month. Sharp contractions in both exports and imports were deteriorated by subdued exports growth of all sub-sectors such as Manufacturing, Mining and Agriculture sectors as well as sluggish imports of Intermediate, Capital and Consumption goods.

Slumping exports of manufacturing outputs despite soaring Rubber demand – Export of Manufacturing outputs which consisted 86.5% of total exports deplete 23.5% y-o-y in view of slumbering exports of E&E products (-19.9% y-o-y vs Apr’20:-21.7% y-o-y), Chemicals & chemical products (-24.2% yo-y vs Apr’20:-18.2% y-o-y), Machinery, equipment & parts (-29.6% y-o-y vs Apr’20:-53.3% y-o-y), Manufactures of metal (-35.4% y-o-y vs Apr’20:-54.2% y-o-y), Optical & scientific equipment (-11.3% y-oy vs Apr’20:-34.8% y-o-y) as well as Iron & steels (-19.7% y-o-y vs Apr’20:+21.5% y-o-y). However, exports of Rubber products were at all-time high, growing +20.5% y-o-y (vs Apr’20:+11.7% y-o-y) arising from stellar demand amid current pandemic situation. Meanwhile, exports of manufactured goods slightly dropped by -2.1% m-o-m.

Huge export contractions in mining and agriculture outputs – Export of Mining extended it negative exports growth from -31.6% y-o-y during Apr’20 to -49.1% y-o-y during May’20 following slide in growth in crude petroleum coupled with LNG (-30.7% y-o-y vs Apr’20:-20.5% y-o-y). Moreover, on monthly basis, exports in Mining depleted 29.4% m-o-m during this period. On the same note, demand for Agriculture products also tumbled -21.3% y-o-y but improved 5.0% m-o-m following sluggish exports of palm oil and palm oil-based agriculture products (-15.6% y-o-y vs Apr’20:-1.5% y-o-y).

Higher demand for palm-oil based products from ASEAN amid subdued overall exports; Exports with China remained resilient – Exports to ASEAN remained subdued (exports and imports down -30.6% y-o-y and-42.2% y-o-y respectively) following slower trade with Singapore (exports:-21.9% y-o-y; imports:-39.5% y-o-y), Thailand (exports:-40.0% y-o-y; imports:-49.5% y-o-y) and Indonesia (exports:-37.5% y-o-y; imports:-39.3% y-o-y) due to lower demand from E&E products, petroleum products, iron & steels, manufacture of metal and crude petroleum despite surging demand from palm oil and palm oil-based agriculture products and LNG products. Nevertheless, exports to USA recovered as exports growth only contracted -9.3% y-o-y (vs Apr’20:-31.1% y-o-y) amid sharp contraction in imports (- 16.4% y-o-y vs Apr’20:-3.5% y-o-y). However, exports with China remained stellar, improving +4.5% y-o-y (vs Apr’20: +4.2% y-o-y) despite plunge in imports (-21.7% y-o-y vs Apr’20:-6.0% y-o-y) as China has resumed their business operation normally. Higher exports with China were underpinned by exports of petroleum products as well as iron & steels.

Imports slowed by soothing import components – Import registered a massive contraction of -30.4% y-o-y in May’20 from -8.0% y-o-y in previous month in view of soothing imports of all of import items. Intermediate goods which was the major import components (58.9%), sliding -27.8% y-o-y (vs Apr’20:- 30.6% y-o-y) due to lower imports of plastics & articles. Besides, Capital goods turned to the red, -27.8% y-o-y (vs Apr’20:+68.9% y-o-y) after posting strong growth in prior month due to disappointing imports of machinery, mechanical appliances & parts. Moreover, Consumption goods also tumbled, -21.9% y-o-y (vs Apr’20:-12.0% y-o-y) in view of slower imports of semi-durable goods i.e. footwear

Source: JF Apex Securities Research - 30 Jun 2020