Export back into red while imports contraction narrowed – Aug’20 exports declined by -2.9% y-o-y after posting a positive trajectory for two consecutive months (vs July’20:+3.1% y-o-y). Meanwhile, imports narrowed its negative growth to -6.5% y-o-y in Aug’20 from -8.7% y-o-y during prior month. Both results were marginally below our in-house and market expectation. Exports were bogged down by slower demand from most sectors especially Mining. Besides, contraction in imports was caused by lesser outsource of Intermediate and Capital components. As a result, trade surplus stood at RM13.2b, improving +19.7% y-o-y. On a monthly basis, exports and imports declined -14.5% m-o-m and -2.2% m-o-m respectively.

Mild contraction in export of manufacturing products – Export of Manufacturing products registered a mild contraction of -0.1% y-o-y (vs July’20:+4.7% y-o-y) following contractions in Chemicals & chemical products (-23.4% y-o-y vs July’20:-23.2% y-o-y), Petroleum products (-15.9% y-o-y vs July’20:- 6.5% y-o-y), Machinery, equipment & parts (-11.3% y-o-y vs July’20:-4.5% y-o-y) and Manufactures of metal (-30.7% y-o-y vs July’20:-5.9% y-o-y). However, the contraction of export in manufacturing outputs was offset by steady growth in E&E products (+7.6% y-o-y vs July’20:+9.2% y-o-y) and Rubber products (+66.8% y-o-y vs July’20:+93.9% y-o-y) albeit at a slower mode, as well as Optical & scientific equipment (+28.6% y-o-y vs July’20:+9.9% y-o-y).

Export of Mining remains at double digit contraction; Agriculture exports falls to negative – Export of Mining fell -25.9% y-o-y (vs July’20:-30.2% y-o-y), no thanks to disappointing exports of LNG and Crude petroleum outputs. Moreover, exports of Agriculture turned back to contraction at -4.5% y-o-y in Aug’20 from double digit growth of +30.4% y-o-y following sluggish exports of palm oil and palm oilbased agriculture products (+0.4% y-o-y vs June’20:+52.0% y-o-y).

Imports to ASEAN remained at double-digit contraction; exports to China soared – Exports to ASEAN declined to -8.0% y-o-y (vs July’20:+0.1% y-o-y) arising from slower exports from Thailand (- 23.0% y-o-y), Vietnam (-6.4% y-o-y), Indonesia (-20.8% y-o-y), Philippines (-4.3% y-o-y), Brunei (-8.9% y-o-y) and Cambodia (-59.7% y-o-y). On the same note, imports to ASEAN registered double-digit contraction for three consecutive months at -13.7% y-o-y. Nevertheless, exports to China remained healthy as growing +20.9% y-o-y in Aug’20 (vs July’20:+13.9% y-o-y) buoyed by stellar exports of E&E products, iron & steel products as well as other manufactures (SSD). However, imports to China were sluggish at - 8.5% y-o-y.

Soothing import growth due to intermediate and capital goods – Total imports depleted from-8.7% y-o-y in July’20 to -6.5% y-o-y in Aug’20. Intermediate goods which the main imports components tumbled -5.6% y-o-y (from -17.3% y-o-y in last month) arising from lesser imports of iron & steel. Addition, capital goods posted massive contraction among others, depleting -16.0% y-o-y (vs July’20:-19.7% y-o-y), no thanks to fewer imports of parts of machinery & mechanical appliances. Nevertheless, consumption products improved +2.9% y-o-y (from +0.1% y-o-y in July’20) in view of stellar imports of durables particularly parts of machinery & mechanical appliances.

Subdued trade growth for 2020 – We expect trade activities for rest month of 2020 to improve further amid resumptions in economic and social activities since recovery mandatory control order (RMCO). Still, for 2020, we expect trade performance to remain challenging as it is being deteriorated by Covid-19 virus outbreak worldwide. Moreover, despite some recovery in the number of COVID-19 cases, we are still cautious on the downside risk of new waves of COVID-19 cases in some countries included ours. Overall, we foresee 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 - 29 Sept 2020