● Exports grew 0.2% YoY in October, though at a lesser rate than September’s 13.6%, confounding house and market expectations (KIBB: -0.8%; consensus: -0.4%)

− MoM (2.4%; Sep: 12.4%): moderated after rebounded sharply last month, however, in terms of value, it was the third highest (RM91.1b; Sep: RM88.9b) ever recorded, indicating a continuing economic recovery despite government anticoronavirus measures.

− Detailed export statistics will be released in the first week of December.

● Moderation in export growth was driven by falling demand among most major export partners

− CN (4.9%; Sep: 41.9%): plummeted to a five-month low.

− US (25.6%; Sep: 22.1%): expanded despite a surge in US COVID-19 cases.

− EU (4.7%; Sep: 15.8%): growth slowed sharply, resulting from a weak demand following the resumption of lockdown measures across Europe.

● Import contraction continued for the eighth consecutive month at a faster pace of -6.0% YoY (Sep: -3.6%; KIBB: -0.7%; consensus: -4.9%). This persistent contraction was driven by falling re-exports (-4.9%; Sep: 38.6%) and weak retained imports (-6.3%; Sep: -13.1%)

− By segment, the demand for intermediate goods fell by less (-6.1%; Sep: -17.7%), purchases of consumption goods were reduced (6.5%; Sep: 11.2%), and the decline in purchases of capital goods worsened (-17.1%; Sep: -2.2%).

● Trade surplus rose to RM22.1b (Sep: RM21.9b) even as MoM export growth (2.4%; Sep: 12.4%) was outpaced by a rise in import growth (2.9%; Sep: 1.6%)

● 2020 export forecast range maintained (-10.0% to -5.0%; YTD: -3.3%; 2019: -0.8%)

− Despite encouraging signs that Malaysia trade activities are recovering from the unprecedented shock to supply chains caused by the COVID-19 pandemic, the recent global resurgence in COVID-19 infections is seen to hurt external demand. Additionally, renewed restrictions to curb the COVID-19 spread in the country could present a headwind to the recovery as reflected by Malaysia’s Manufacturing PMI falling for the fourth consecutive month in October (48.5; Sep: 49.0).

− On the back of worsening COVID-19 situation and the reinstatement of Conditional Movement Control Order, we have revised our 4Q20 GDP forecast to a larger contraction of -1.7% (3Q20: -2.7%) from the previous -1.1%. Accordingly, the Malaysian economy is expected to see a contraction of -5.1% for 2020 (2019: 4.3%).

Source: Kenanga Research - 30 Nov 2020