OVERVIEW

● Exports continued to slide in May for seven straight months, down by 9.0% YoY (Apr: -9.5%) but better than the consensus estimate of -14.5% (Bloomberg). On a MoM basis, it rebounded sharply by 12.4% to USD14.7b, the highest export value recorded in six months. Meanwhile, imports fall was far larger at -17.7% YoY (Apr: -4.7%) to USD14.5b, against the consensus estimate of -13.9%. As a result, the trade balance turned into a surplus of USD0.2b (Consensus: -USD1.4b) from a deficit of USD2.3b in April, providing some support to the Rupiah. Overall, total trade fell sharply by 13.5% YoY (Apr: -7.0%) as a result of global slowdown and the impact of US-China trade war.

● Exports of non-oil and gas continued its downtrend, falling by 6.4% YoY (Apr: -7.1%) driven by weak shipments in manufacturing and mining & others, which fell by 0.6% and 14.3% respectively. Meanwhile, exports of agriculture surprisingly rebounded to 3.0% YoY (Apr: -15.8%). On MoM, however, exports of non-oil and gas rebounded by 10.2% to USD13.6b though its share to total exports edged down to 92.4% (Apr: 94.3%). Similarly, the decline in exports of oil and gas-based products ease to 31.8% YoY (Apr: -37.1%) attributable to a contraction in gas procurement, manufacturing, and mining of 100%, 73.7%, and 24.7% respectively. On MoM, it rebounded sharply by 50.2% (Apr: - 34.9%) to USD1.1b.

● Imports continued its downtrend for the fourth straight month, registering a larger decline of 17.7% YoY (Apr: -4.7%), a record 42-month low mainly on fall in the purchase of both oil and gas (-26.9%; Apr: -4.0%) and non-oil and gas (- 15.9%; Apr: -4.8%). The decline was broad-based led by import of raw materials (-19.1%; Apr: -4.3%) followed by capital goods (-15.2%; Apr: -7.9%) and consumer goods (-10.9%; Apr: -2.9%). On a MoM basis, imports fell by 5.6% to USD14.5b, indicating a weak demand during the month as policy measures continue to exert pressure.

● Year-to-date, exports fell by 8.7% YoY (Jan-May 2018: +9.7%) largely on the back of the impact of persistent US-China trade dispute and global economic slowdown. Overall, we maintain our view that exports’ growth in 2019 would moderate to 1.0-3.0% lower than our earlier projection of 4.5-5.5% (2018: 6.7%) as uncertainties from external factor is expected to weigh on the country's trade performance.

Source: Kenanga Research - 25 Jun 2019