● Exportsdwindledfurther in May (-25.5% YoY; KIBB estimate:- 16.4%; consensus: -20.2%; Apr: -23.9%), its biggest fallin 11 years (May 09: -29.5%)

- MoM (-3.2%; Apr: -19.1%): fell by less, reflecting slight improvement in economic activity as multiple nations begun to gradually ease lockdown restrictions in May.

- As this was a debut early release, the Department of Statistics will be releasing the detailed breakdown on exports on July 3.

● Thedeeper drop inexports wasled byworseneddemand from the regional peers, mainly ID and HK

- ID (-37.5%; Apr: -2.3%): sharpest fall since August 2009as domestic activities faced the brunt of a full-month lockdown in May.

- HK (-23.5%; Apr: -8.2%): steepest fall in eight months, with business activities damaged not only by the pandemic, but also the resurgence of protest movement triggered by disagreement over the Hong Kong’s security law.

● Importsplungedin May (-30.4% YoY; KIBB: -26.0%; consensus: -18.6%; Apr: -8.0%), matching an over 11-year low, due to slowdown in both retained imports (-30.4%; Apr: -18.2%) and re-exports (-30.0%; Apr: 38.2%)

- Negative shift in imports of capital goods (-27.8%; Apr: 68.9%), after a one-time purchase of floating structures for the Petronas Floating LNG-2 project last month, and continued drop in imports of consumption goods (-21.9%; Apr: -12.1%) outweighed the relatively softer fall in demand for intermediates (-27.8%; Apr: -30.6%).

● Trade balance returned to a surplus (RM10.4b; Apr:-RM3.6b) as imports declined(-23.6%; Apr:0.9%) at a much faster pace than exports (-3.2%) on a MoM basis.

● 2020 export forecastrange maintained(-15.0% to-10.0%; 2019: -1.7%) on thebackofpersistingweakness in foreign demand

- While the degree of decline in exports is expected to soften in line with the ongoing economic reopening, the broad weakness in external demand will remain, with further downside risks emanating from the simmering geopolitical tension among major economies (e.g. US-CN, US-EU) and resurgence of COVID-19 cases in major export destinations.

- Though sluggish private investment and consumption activities amid surging unemployment would further weigh on the economy, we still believe that the impact of the gradual ease of movement restriction and the reopening of the economy are still at an early stage. Hence, we maintain our 2020 GDP growth forecast at -2.9% (2019: 4.3%).

Source: Kenanga Research - 30 Jun 2020