- MoM: steepest drop in nine months (-10.8%; Oct: 16.6%).

● Product-wise, smaller contraction in crude petroleum exports and higher shipments of iron & steel outweighed a sharp drop in electrical & electronics (E&E) goods

- Crude petroleum (-23.4%; Oct: -50.5%): Its lowest contraction in five months amid smaller YoY drop in the average Brent crude oil price (-2.4% to USD63.21/barrel; Oct: -26.3% to USD59.71/barrel) ahead of the OPEC’s announcement of a deepening of oil production cuts by an additional 500,000 barrels per day until March 2020.

- Iron & steel (700.3%; Oct: 133.1%): surged to a 4-month high.

- E&E (-11.6%; Oct: -3.2%): second-largest fall in over six years attributable to a decline in electronic integrated circuits (-17.6%; Aug: -5.9%) amid continued downturn in the global chip market.

● By destination, higher demand from China and the US outpaced deterioration in shipments to the regional peers

- CN (4.1%; Oct: -11.0%): charted a positive turnaround, suggesting that the China’s stimulus measures may have started to stoke demand.

- US (6.5%; Oct: 2.7%): normalised as high base-effect faded.

- EA-7 (-12.1%; Oct: -1.0%): weaker demand mainly in Singapore and Hong Kong as the latter’s economic activities were halted by the prolonged political unrest.

● Imports lessened its fall (-3.6%; consensus: -5.0%; KIBB: -2.2%; Oct: -8.7%) on higher retained imports (0.2%; Oct: -8.2%)

- Improvement led by the intermediate goods (1.8%; Oct: -5.1%), followed by capital (-4.3%; Oct: -11.5%) and consumption goods (1.9%; Oct: -5.0%).

● Trade surplus narrowed to a 15-month low (RM6.5b; Oct: RM17.3b) as exports declined (-10.8%) while imports expanded (1.4%) on a MoM basis

● November’s trade performance would precipitate an overall slowdown of exports in the 4Q19 and in line with our expectation that GDP growth could slow to 4.0% (3Q19: 4.4%), bringing full 2019 growth to 4.5% (2018: 4.7%)

● Exports to gradually recover in 2020, charting a single-digit growth between 1.0-4.0% (2019F: -1.0% to -2.0%; 2018: 7.3%, YTD: -2.1%)

- Supported by a potential upturn in the tech sector and lagged impact from the recent cycle of monetary easing and expansionary fiscal measures adopted in multiple economies.

- Headwinds remain arising from developments on the US-China trade negotiation, geopolitical tensions and pace of economic expansion in major trading partners.

- As it requires several months for external recovery to seep into the domestic sectors, we foresee the economic growth to moderate to 4.3% in 2020 (2019F: 4.5%).

Source: Kenanga Research - 6 Jan 2020