● Export performance continued to improve in August, registering the smallest decline in four months (-7.9% YoY; consensus: -12.1%; Jul: -11.4%).

● By product, the better performance was underpinned by shipments of manufacturing goods and mineral & fuel

- Manufacturing (-6.2%; Jul: -10.3%): slowest decline in four months due to a spike in shipments of unwrought gold (71.5%; Jul: 37.2%) and a positive flip in exports of electrical equipment (3.4%; Jul: -6.9%).

- Mineral & fuel (-26.7; Jul: -36.5%): smallest drop in five months attributable to a softer decline in shipments of refined fuels (-25.7%; Jul:-38.7%) amid improved global oil demand as reflected by higher crude oil price (USD43.2/barrel; Jul: USD40.3b).

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

- This was steered by a lesser YoY decline of shipments of goods to ASEAN-5 (-16.4%; Jul: -24.2%) and the euro area (-16.3%; Jul: -17.0%).

● Similarly, imports contraction eased to a two-month low (-19.7%; consensus: -20.2%; Jul: -26.4%)

- Largely driven by a smaller drop in imports of capital goods (-10.8%; Jul: -25.1%), in line with the improved business sentiment.

● Trade surplus further widened to its largest in over four years (USD4.4b; Jul: USD3.3b), as imports’ MoM growth (2.5%) lagged that of exports (7.4%).

● We retain our 2020 export growth forecast range (-10.0 to -5.0%; YTD: -7.8%; 2019: -2.6%)

- Smaller MoM expansion in exports (7.4%; Jul: 14.4%) is consistent with our view of a receding pent-up demand and limited business activities due to re-implementation of measures to tackle the resurgence of COVID-19 cases in major economies.

- We continue to expect an unchanged policy rate for the remainder of 2020, underscored by the BoT’s less dovish monetary policy statement, continued improvement in domestic activities, deployment of additional fiscal stimulus worth USD2.2b in 4Q20 and amid limited policy space.

Source: Kenanga Research - 24 Sept 2020