● Exports fell-23.8% YoY in April (Mar:-4.7%), the biggest fall since September 2009, undershootingestimates(consensus:-12.8%; KIBB: -15.1%)

- MoM: steepest drop in 14 months (-19.0%; Mar: 7.6%) amid global shutdown and falling commodity prices due to COVID-19 pandemic.

● Product-wise, the sharp decline was due to weak exports in almost all major exporting items, led by commodities and electrical & electronic (39.9% share of exports) products

- Commodities (-20.2%; Mar: -8.7%): sharpest contraction in 5 months, led by a decline in exports of crude petroleum (-33.8%; Mar: -4.2%) and exports of petroleum products (-22.2%; Mar: 44.3%) as the coronavirus hammered global oil demand, dragging Brent crude oil price to weakened by -62.8% to USD26.6/bbl in April. In addition, the decline was due to weak demand for palm oil & palm oil-based products (-2.4%; Mar: -0.9%) and liquefied natural gas (-20.5%; Mar: -13.4%).

- Electrical & electronics (-21.7%; Mar: -13.9%): lowest since 2009 global financial crisis, mainly due to an extended drop in shipments of thermionic valves & tubes (-3.8%; Mar: -3.5%).

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

- EU (-41.6%; Mar: -13.4%): sharpest drop on record as more countries across Europe issued a nationwide lockdown to halt the spread of COVID-19 pandemic in April.

- US (-31.1%; Mar: -3.6%): lowest in more than a decade.

- CN (4.2%; Mar: -6.1%): charted a positive turnaround as China began to relax lockdown measures.

● Imports fell to a 6-month low in April, much lesser than the market and house expected (-8.0% YoY; KIBB:-21.7%; consensus:- 15.6%; Apr: -2.7%)

- Due to significant drop in imports of intermediate (-30.6%; Mar: 2.2%) and consumption (-12.0%; Mar: 7.0%) goods. Bucking the trend, imports of capital goods chartered a sharp expansion (68.9%; Mar: -48.1%), a 37-month high.

- Meanwhile, re-exports rose to an 18-month high (38.2%; Mar: 13.4%) despite battling the first full month of Movement Control Order (MCO) in April.

● Trade balance swung to a trade deficit in April (-RM3.5b; Mar: 12.3b) for the first time since the 1997 Asian Financial Crisis as exports declined sharply (-19.0%) while imports expanded (0.9%) on a MoM basis.

● House maintains 2020 export forecast (-15.0% to -10.0%; 2019: -1.7%) on the expectation that external demand is likely to remain subdued

- The short-term outlook remains weak despite graded relaxations of MCO from May 4th onwards as Malaysia’s exports is expected to ride the wave of uncertainty in 2020 on the back of escalating US-CN tensions, oil price volatility and a possibility of a second wave of infections.

- Hence, the sharply weaker external demand mainly reflects in our 2020 GDP growth forecast of -2.9% (2019: 4.3%), apart from the impact of falling oil prices and sluggishness in private consumption due to changes in consumer spending behaviour

Source: Kenanga Research - 5 Jun 2020