• Exports moderated to 47.3% YoY in May (Apr: 63.0%) beating expectations (KIBB: 61.5%; consensus 57.5%)
  • - MoM (-12.6%; Apr: 0.6%): fell sharply, reflecting the impact of nationwide Movement Control Order (MCO 3.0) from May 12amid a resurgence of COVID-19 cases.
     
• Broad-based slowdown across major trading partners, but growth remained high due to the base effect, following a sharp contraction in May 2020 (-26.0%)
  • By destination: broad based moderation among major trading partners led by the US (46.5%; Apr: 128.6%), EU (33.5%; Apr: 85.4%) and CN (17.7%; Apr: 28.0%).
     
  • By sector: sharp expansion in mining sector (76.0%; Apr: 24.4%) partially mitigated growth moderation in manufacturing (45.4%; Apr: 65.4%) and agriculture (51.7%; Apr: 66.9%).
     
• Imports accelerated (50.3%; Apr: 24.6%), highest since February 1998. The growth was a tad higher thanthehouse forecast (KIBB: 50.1%; consensus:48.6%), bolstered by the fourth successive month of expansion in retained imports (49.2%; Apr: 29.7%)
  • Attributable to a double-digit growth expansion in intermediate goods (52.4%; Apr: 64.6%) followed by consumption goods (37.8%; Apr: 29.6%) and a sharp rebound in capital goods (34.0%; Apr: -37.7%) as well as partly due to base effect.
     
• Trade surplus narrowed to RM13.7b (Apr: RM20.4b) lower than expectations(KIBB:RM22.8b; consensus:RM18.0b), as MoM exports (-12.6%) fell larger than imports (-7.8%). Meanwhile, total trade expanded for the fourth straight month (48.7%; Apr: 43.3%), highest since Feb 1998 on base effect.
   
• Exports forecast retained at 11.8% (2020: -1.4%) due to base effect and continued external demand recovery
  • While growth would likely be affected by the domestic containment measures primarily due to the closure of the nonessential sector under the Phase 1 National Recovery Plan, we continue to expect higher trade growth in the coming months and overall 2021. This is mainly due to the low base effect in 2020 and continued demand from major trading partners in line with their gradual economic reopening.
     
  • Nonetheless, we remain cautiously optimistic in our growth forecast as the COVID-19 resurgence both domestically and regionally would likely disrupt the overall trade activities and supply chain due to the containment measures. Consequently, we have revised our 2021 GDP growth forecast to a range of 5.0-6.0% (point forecast: 5.5%) from 6.0-6.5% (2020: -5.6%) to reflect the adverse impact of COVID-19 resurgence and its restriction measures on the economy.

Source: Kenanga Research - 29 Jun 2021