● Exports fell marginally in May (-0.7 YoY; Apr: -17.6%), better than expectations (KIBB: -16.4%; consensus: - 12.0%)

- MoM (13.7%; Apr: -18.9%): rebounded sharply to a two-month high, following the steepest drop in the previous month. This also signals that the slowdown in global trade may not be as severe as we expected earlier.

● Exports were relatively supported by key sectors and trading partners especially from major Asian markets

- By destination: rebounded among main trading partners led by SG (6.8%; Apr: -1.4%), followed by JP (2.1%; Apr: -22.1%), CN (1.5%; Apr: -20.4%) and KR (10.3%; Apr:10.9%).

- By sector: supported by a rebound in manufacturing (1.8%; Apr: -15.5%) and mining (5.9%; Apr: -30.9%) sectors but partially weighed by sustain weakness in agriculture (-30.9%; Apr: -29.2%) sector.

● Imports contracted (-3.3%; Apr: -11.1%) for the third straight month amid high base effect but beating expectations (KIBB: -20.3%; consensus: -11.1%). On a MoM basis, growth rebounded sharply (12.6%; Apr: - 10.1%), the fastest since June 2022, thanks to higher re-exports (6.4%; Apr: 3.7%) and as slowdown in retained imports (-6.2%; Apr: -15.5%) eased

- By category, growth was supported by an expansion in the capital (13.7%; Apr: 11.3%) and consumption (4.5%; Apr: -1.6%) goods. Nonetheless, the momentum was weighed by a sustained contraction in intermediate goods (- 12.3%; Apr: -24.1%).

● Trade surplus expanded to RM15.4b (Apr: RM12.6b), beating expectations (KIBB: RM14.9b; consensus: RM13.4b) as MoM exports (13.7%) rebound outpaced imports (12.6%)

- Nonetheless, total trade remained weak, falling (-2.0%; Apr: -14.6%) for the third straight month.

● 2023 exports forecast retain at -4.2% (2022: 25.0%) for now amid a cautiously optimistic outlook and a sustained high base effect till September

- Despite better-than-expected export growth in May, we maintain a cautious outlook as regaining a positive growth in the coming months will be rather challenging. This is largely due to the high base effect, especially in the 3Q23, and expectations of a weaker global trade outlook and lower commodity prices amid the impact of monetary policy tightening in the advanced economies. For reference, year-to-date exports as of May currently stood at -2.3% (JanMay 2022: 23.3%).

- Nevertheless, we maintain our 2023 GDP growth forecast at 4.7% (2022: 8.7%) for now despite expectations of a slowing external trade trend in the near term as we expect domestic demand to offset the impact of a slowdown in the commodity-related and manufacturing export-oriented sectors.

Source: Kenanga Research - 21 Jun 2023