● Exports lessened its decline (-1.4% YoY; consensus: +1.2%; Aug: -4.0%)

- Largely due to growing shipments of principle manufacturing goods and improved demand from regional peers.

● By product, the better exports figure was led by manufacturing and agro industrial goods

- Principle manufacturing: grew by 0.2% (Aug: -1.9%) driven by higher shipments of electrical equipment.

- Agro industrial: spiked to an 11-month high (11.5%; Aug: -1.5%) on increased demand for sugar.

● By destination, the improved demand for Thailand’s exports was steered by China, ASEAN-5 and the US

- Exports growth rebound to China (6.1%; Aug: -2.7%), ASEAN-5 (0.6%; Aug: -24.6%) and reacceleration to the US (7.8%; Aug: 5.8%) outweighed softer demand from the euro zone (-8.3; Aug: -6.6%).

- The soaring THB, which has climbed by 7.0% against the greenback this year, may jeopardise Thailand’s export competitiveness in the near-term.

● Imports fell at a softer pace (-4.2%; consensus: -5.4%; Aug: -14.6%)

- Underpinned by smaller contraction in imports of raw materials & intermediates (-5.4%; Aug: -27.7%) and capital goods (-0.8%; Aug: -7.9%), as well as positive turnaround in consumer goods (+11.0%; Aug: -0.9%), amid improved sentiments following the government’s announcement of a USD10b stimulus package.

- Trade surplus narrowed to USD1.3b (Aug: USD2.1b) as exports (-6.5%) charted a steeper drop compared to imports (-3.3%) on a MoM basis.

● 2019 exports forecast revised down to -1.0-0.0% (YTD: -2.1%) from 0.5-1.5% (2018: 6.9%)

- Rising headwinds from the ongoing US-China trade dispute, economic moderation in key export markets including China and the EU, and tech down cycle.

- We expect the Bank of Thailand to opt for another round of 25 basis points rate cut, bringing the policy rate to settle at 1.25% by year-end, to counter the slowdown in domestic demand and tame the strengthening Baht.

Source: Kenanga Research - 22 Oct 2019