● Exports reverted into a contraction in February (-4.5% YoY; Jan: 3.3%), but registered above consensus (-9.2%)

● By segment, exports deterioration was largely attributable to manufacturing goods, and to a smaller extent mineral & fuel

- Manufacturing (-5.2%; Jan: 5.2%): steepest contraction in three months, reflecting softer shipments of unwrought gold (178.4%; Jan: 299.6%) and decline in exports of electrical equipment (-2.8%; Jan: 3.7%).

- Mineral & fuel (6.6%; Jan: 7.3%): moderated on decrease in exports of refined fuels (0.1%; Jan: 5.9%), amid decline in crude oil price (-12.9%; Jan: 7.1%).

● By destination,thedropwasprimarily due to a marked slowdownindemand fromthe US (-37.0%; Jan: 9.9%), Japan(-11.1%; Jan: -2.5%) and China (-2.0%; Jan: 5.2%)

- In contrast, demand from regional peers expanded to 4.3% (Jan: 0.3%).

● Imports dropped by less (-4.3%; consensus: -3.5%; Jan: -7.9%)

- Improvement due to a one-off surge in imports of arms & munitions (-1602.9%; Jan: -96.8%)and narrowed decline in imports of raw materials & intermediates (-5.5%; Jan: -10.2%).

- Imports of consumer goods fell to a six-month low (-6.8%; Jan: 9.6%), suggesting tepid domestic demand.

● Trade balance recorded its largest surplus in a year (USD3.9b; Dec: -USD1.6b) as imports (-20.9%) declined while exports expanded (5.2%) on a MoM basis

● 2020 exports forecast retained at -2.0-0.0% (2019: -2.7%) on adverse spillovers from the COVID-19 pandemic

- Exports to remain pressured this year due to ongoing drought conditions and COVID-19 pandemic, which has increasingly disrupted the global supply chain and resulted in softer demand from major trade partners.

- With depressed growth outlook and likely slow containment of the coronavirus, the BoT has embarked on a rare intermeeting rate cut of 25bps, in line with expectation. We expect the BoT to maintain the policy rate at a record low of 0.75% at the official meeting tomorrow, saving its bullet should the pandemic situation deteriorates further.

Source: Kenanga Research - 24 Mar 2020