● Exports increased 3.1% YoY in July, albeit at alesser rate than June’s 8.0%, confounding house and market expectations (KIBB estimate: -1.1%; consensus: -1.4%)

- MoM (11.7%; Jun: 32.2%): moderated after expanding at its fastest pace since April 1997 last month, however, in terms of value, it was the second highest (RM92.5b; Jun: RM82.8b) ever registered after October 2018 record high, signalling that the economy is gradually recovering from the 2Q20 economic slump.

- Detailed trade statistics will be released in the first week of September.

● Slower demand from China outpaced the increase in shipments to US and Singapore

- CH (13.9%; Jun: 46.8%): shipments eased to a two-month low primarily due to a high base effect.

- US (28.6%; Jun: 27.6%): strongest growth since October 2015 amid increased demand for goods.

- SG (3.8%; Jun: 3.7%): edged up to the highest in 4 months due to the easing of circuit breaker measures.

● Imports dwindled further in July (-8.7% YoY; Jun:-5.6%), undershooting estimates (KIBB: -0.6%; consensus: -4.5%) due to a sharper decline in retained imports (-16.5%; Jun: -8.1%). On MoM, growth moderated to 8.7% (Jun: 18.6%)

- Due to a sharp drop in purchase of capital goods (-19.7%; Jun: 2.6%), steeper fall in intermediate goods (-17.3%; Jun:-10.7%) and significant moderation in consumption goods (0.1%; Jun: 9.1%).

● Malaysia loggedbiggest trade surplus since records began (RM25.1b; Jun: RM20.9b) as exports ofgoods increased more (11.7%) than imports (8.7%; Jun: 18.6%) on a MoM basis.

● 2020 export forecast range is revised to -10.0% to -5.0% (2019: -1.7%) from -15.0% to -10.0% on signs of nascent demand recovery

- Trade activities are expected to recover more decisively in 2H20 due to a pick-up in global industrial production as there is an increase in external demand amid global economic recovery. However, the road ahead may be rocky due to the COVID- 19 resurgence in multiple countries coupled with geopolitical uncertainty and trade tensions especially between US and China.

- Forging ahead, the positive impact of the Recovery Movement Control Order and Malaysia’s relative success in curbing the COVID-19 pandemic is expected to cushion the growth slowdown. Nonetheless, we expect 3Q20 GDP growth to fall by 6.2% (2Q20: -17.1%) and the whole year GDP growth forecast at -5.9% (2019: 4.3%).

Source: Kenanga Research - 1 Sept 2020