● Exports surprisinglysurged in September (13.6% YoY;Aug:- 2.9%; KIBB: 1.3%; consensus: 2.0%)to its highest level innearly two years.

- MoM (12.4%; Aug: -14.5%): rebounded sharply, signalling an improvement in demand among export markets, as economic activities continue to resume.

- 3Q20 (4.4%; 2Q20: -15.1%): rebounded to a sevenquarter high (4Q18: 9.0%).

- Detailed export statistics will be released in the first week of November.

● The rebound in exports was led by strong demand from the EU, China, Hong Kong, and the US.

- EU (28.6%; Aug: -13.6%): growth rebounded to a threeyear high.

- CN (41.9%; Aug: 20.9%): surged to a three-month high, contributing 5.9 percentage points (ppts) to the overall growth.

- HK (31.9%; Aug: -0.6%): rebounded sharply to an almost two-year high, on the back of ongoing economic recovery.

● Imports contracted for the seventh consecutive month, albeit at a slower pace (-3.6% YoY; Aug:-6.5%; KIBB:-1.4%;consensus: -3.5%). Growth wasweighed by asharpdecline inretained imports (-13.1%; Aug:-10.0%) but partiallysupportedby a surged in re-exports (38.6%; Aug: 8.5%)

- By segment, growth was attributable to a decline in the purchase of intermediate goods (-17.8%; Aug: -5.6%) and capital goods (-1.8%; Aug: -15.6%), but partially offset by a sharp expansion in consumptions goods (11.2%; Aug: 2.9%).

● Trade surplusrose to RM22.0b (Aug: RM13.2b) as MoM exportsgrowth (12.4%; Aug: -14.5%) increasedat a faster pace than imports (1.6%; Aug: -2.2%).

● 2020 export forecast range maintained (-10.0% to -5.0%; YTD: -3.7%; 2019: -0.8%)

- Though it appears that exports have begun to recover, we remain cautious on growth outlook given the current surge of COVID-19 infections in major economies such as the US and EU. Global demand and supply chains remain vulnerable to disruption due to the ongoing pandemic as evidenced by Malaysia’s Manufacturing PMI falling for the third consecutive month in September (49; Aug: 49.3).

- While 3Q20 exports rebounded sharply, we maintain our 3Q20 GDP forecast at -6.2% (2Q20:-17.1%).Given the weak growth recovery to continue weighed by the global COVID-19 resurgence, weak oil prices, domestic political instability, and rising geopolitical tensions, the overall GDP growth forecast for 2020 to remain at -5.9% (2019: 4.3%).

Source: Kenanga Research - 30 Oct 2020