● Exports fell at the steepest pace in 43 months (-7.4% YoY; consensus: -4.5%; Oct: -4.5%)

- Due to weaker shipments of principle manufacturing goods and tapered demand from Japan and the US.

● By segment, the deterioration in exports was led by manufacturing and mineral & fuel

- Manufacturing at a 13-month low (-6.4%; Oct: -2.6%): dwindling exports of electronic machines and electrical equipment, mainly telephone sets for the former and television receiver for the latter.

- Mineral & fuel (-36.0%; Oct: -34.5%): faster drop in shipments of refined fuels, specifically diesel oil.

● By destination, the steeper decline in exports was steered by weak demand from Japan and the US

- Export growth to Japan (-10.9%; Oct: 0.5%) and the US (-2.6%; Oct:4.8%) turned negative,offsetting a rebound in shipments to China (2.3%; Oct: -4.2%).

- The gloomy exports figure was also arepercussion of thesoaring THB, which hasstrengthenedby 9.0% against the USD over the past 12 months further to THB30.24 per USD in November (Oct: THB30.37), exerting pressure on Thailand’s export competitiveness.

● Imports declined to a three-month low (-13.8%; consensus: -6.8%; Oct: -7.6%)

- Attributable to a larger drop in imports of fuel lubricants (-47.9%; Oct:-28.5%)andcapital goods (-8.9%; Oct: 3.1%), outpacing a rebound in demand for consumer goods (3.0%; Oct: -0.8%) and softer decline in imports of raw materials & intermediates (-6.1%; Oct: -9.3%).

- Trade surplus expanded slightly to USD0.55b (Oct: USD0.51b) as imports (-5.6%) posted a larger contraction compared to exports (-5.3%) on a MoM basis.

● 2019 exportsto likely underperform our initial forecast range of -1.0 to -2.0% (YTD: -2.8%; 2018: 6.9%) given thedownside surprise in November

- Headwinds remained elevated, arising from growth slowdown in key export markets and lingering uncertainty on the USChina trade war following the phase one trade agreement.

- The disappointing trade figures, combined with recent slew of weak economic indicators (e.g. manufacturing production, public expenditure) and slash in growth forecast by the Bank of Thailand (BoT), further strengthen our expectation for the BoT to resume its monetary easing, bringing the policy rate to 1.00% by end-1Q20.

Source: Kenanga Research - 24 Dec 2019