● July exportsmarked the smallest contraction in three months (-11.4% YoY; consensus: -18.8%; Jun: -23.2%), with a double-digit rebound recorded on a MoM basis (14.4%; Jun: 1.0%).

● By product, the better performance was solely underpinned by shipments of manufacturing goods

− Manufacturing (-10.3%; Jun: -25.1%): slowest decline in three months largely due to a sharp rebound in shipments of unwrought gold (37.2%; Jun: -86.0%), in tandem with the rise in gold prices (USD1,841; Jun: USD1,734), and smaller drop in exports of cars and car parts (-30.9%; Jun: -43.2%).

● By destination, improved demand was observed across most countries, excluding China and Taiwan

− This was steered by a lesser YoY decline of shipments of goods toHong Kong (-8.6%; Jun: -32.3%), ASEAN-5 (-24.2%; Jun: - 38.8%) and the euro area (-17.0%; Jun: -22.7%).

● Imports fell furtherin July (-26.4%; consensus: -21.6%; Jun:-18.1%) largely on a high base effect, masking thecontinued MoM expansion (4.3%; Jun: 9.2%)

− Partly attributable to a steeper decline in imports capital goods (-25.1%; Jun: -8.2%), reflecting sluggish industrial demand.

● Trade surpluswidenedto a five-month high(USD3.3b; Jun: USD1.6b) and sixth largest on record, as MoM import growth lagged that of exports.

● We retain our 2020 export growth forecast range (-10.0 to -5.0%; YTD: -7.7%; 2019: -2.6%)

− Sustained MoM expansion in exports supports our view of a sequential recovery in external demand. However, the improvement would be partially capped by receding pent-up demand and a resurgence of COVID-19 cases in major economies, which have resulted in scaling back of lockdown relaxations in affected areas.

− Policy-wise, we maintain our expectation of an unchanged policy rate for the remainder of 2020, underscored by theBoT’s less dovish monetary policy statement, emerging signs of an improved domestic activities, announcement of an additional fiscal stimulus in the coming months and the aim of preserving the BoT’s limited policy space

Source: Kenanga Research - 25 Aug 2020