● Exports’ YoY growth moderated in July (29.3%; consensus: 30.2%; Jun: 54.4%), slightly below market expectations

• MoM: growth fell by 4.5% (Jun: 9.5%) to USD17.7b, reflecting the impact of COVID-19 on external demand.

● Growth was mainly associated with lower base-effect

• Non-O&G (28.3%; Jun: 51.3%): slower growth in manufacturing (20.1%; Jun: 48.9%), and sharp contraction in agriculture (- 17.4%; Jun: 17.4%) but partially supported by an expansion in mining (102.8%; Jun: 93.6%) products. By destination, exports of non-O&G to top trading partners broadly moderated but remain supported by base-effect, led by China (41.2%; Jun: 70.2%), followed by the US (25.3%; Jun: 55.4%) and Japan (13.3%; Jun: 37.6%).
• O&G (50.1%; Jun: 117.2%): growth slowed sharply attributable to weaker O&G manufacturing (-72.8%; Jun: -57.7%) and moderating mining (594.6%; Jun: 898.1%) products.

● Imports slowed (44.4%; consensus: 52.2%; Jun: 60.0%), below expectations due to weak shipment in non-O&G (40.2%; Jun: 48.0%) as well as O&G (86.4%; Jun: 239.4%) while partially supported by base-effect

• By segment, the growth was dragged by a sharp moderation in import of raw materials (54.6%; Jun: 72.0%) and capital goods (5.4%; Jun: 43.3%) but partially supported by consumer goods (46.0%; Jun: 16.6%).
• MoM: fell sharply (-12.2%; Jun: 21.0%) to USD15.1b.

● Trade surplus expanded to USD2.6b(Jun: USD1.3b), slightly above market expectations (consensus: USD2.3b). Meanwhile, total trade moderated (35.9% YoY; Jun: 57.1%) to a four-month low.

● 2021 export growth forecast retained at 15.1% (2020: -2.6%) despite the rising threat of COVID-19 variants

• Year-to-date, exports grew by 33.9%, reflecting a sharp rebound in exports driven by improving external demand and partly due to base-effect. Nonetheless, we remain cautious on the near-term outlook, as the spread of the Delta variant has prompted a reinstatement of movement restrictions around the world, potentially disrupting global demand and supply chain, triggering a further revision to the official 2021 GDP forecast of 3.7%-4.5%.

Source: Kenanga Research - 19 Aug 2021