● Exports charted its first expansion in six months (3.3% YoY; consensus: -3.0%; Dec: -1.3%) in January.

● By segment, the better export performance was led by manufacturing and mineral & fuel

- Manufacturing (5.2%; Dec: -0.9%): accelerated to a six-month high solely on a surge in shipments of unwrought gold (299.6%; Dec: -40.8%).

- Mineral & fuel (7.3%; Dec: -3.0%): fastest growth in two years underpinned by positive turnaround in exports of refined fuels, specifically diesel (10.6%; Dec: -15.0%), as refineries recommenced operations after maintenance shutdowns.

● By destination, the improvement was steered by higher demand from regional peers

- Exports to the EA-8 (0.3%; Dec: -4.9%) and EU (2.5%; Dec: -1.6%) rebounded to a 13-month and 16-month high, respectively.

● Imports reverted to a contractionary mode (-7.9%; consensus: -15.9%; Dec: 2.5%)

- Slowdown led by arms & munitions used in official services (-96.8%; Dec: 431.6%) amid a high base effect, followed by raw materials & intermediates (-10.2%; Dec: 0.4%) and consumer goods (9.6%; Dec: 14.8%), pointing towards lacklustre domestic activities.

- Trade balance recorded its largest deficit in a year (-USD1.6b; Dec: USD0.6b) as imports (14.1%) posted a larger expansion compared to exports (2.5%) on a MoM basis.

● 2020 exports forecast revised down to -2.0-0.0% from -2.0-1.0% (2019: -2.7%) on adverse spillovers from the COVID- 19 outbreak

- Exports recovery driven by the tech cyclical upturn spurred by the 5G rollout is expected to be delayed by the ongoing drought conditions and COVID-19 epidemic, which has disrupted the global supply chain and resulted in softer demand from China.

- With depressed growth outlook and possibly slow containment of the coronavirus, we retain our expectation that the BoT may embark on another 25 bps rate cut in the immediate term, after cutting the policy rate to a fresh record-low of 1.00% in early-February.

Source: Kenanga Research - 25 Feb 2020