● Exports remained on a recovery path in September, registering the smallest contraction in five months (-3.9% YoY; consensus: -4.1%; Aug: -7.9%), partly attributable to a low base effect.

● By product, the better performance was mainly driven by shipments of agricultural and manufacturing goods

- Agricultural (9.8%; Aug: -19.4%): registered its first growth in four months due to a smaller drop in shipments of poultry (-3.8%; Aug: -12.8%).

- Manufacturing (-3.9%; Aug: -6.2%): slowest decline in five months underpinned by a softer decline in automobiles exports (-14.6%; Aug: -26.9%) and a rebound in shipments of electronic machines (11.6%; Aug: -2.6%), specifically computer parts, in line with the rising work-from-home trend.

● By destination, improved demand was observed across most countries, excluding the ASEAN-5 and HK

- This was steered by a growth in demand from CN (6.9%; Aug: -4.1%), as well as a lessened drop in exports to the euro area (-1.9%; Aug: -16.3%) and JP (-2.0%; Aug: -16.7%).

● Imports marked its smallest fall in six months (-9.1%; consensus: -16.3%; Aug: -19.7%)

- Largely driven by a much smaller drop in imports of fuel lubricants (-3.8%; Aug: -34.2%) and raw materials & intermediates (-12.6%; Aug: -20.5%).

- Imports of consumer goods fell to a four-month low (-11.7%; Aug: -7.7%), suggesting weak domestic demand.

● Trade surplus narrowed to a three-month low (USD2.2b; Aug: USD4.3b), as imports rose (9.6%) while exports declined on a MoM basis (-2.9%).

● We retain our 2020 export growth forecast range (-10.0 to -5.0%; YTD: -7.3%; 2019: -2.6%)

- The sequential decline in exports (-2.9%; Aug: 7.4%) echoes our view of a softer momentum in external demand recovery and businesses’ expectations of a weaker export conditions in the next 3 months (48.7; Aug: 51.0) as multiple economies grapple with a resurgence of COVID-19 cases.

- Policy-wise, we continue to expect the BoT to keep the policy rate unchanged (0.50%) for the rest of 2020, underscored by its less-dovish tone and amid limited policy space.

Source: Kenanga Research - 23 Oct 2020