● Exports fell sharply in August (-21.2% YoY; Jul: -18.1%), slightly less contractionary than consensus’ -22.6%, due to weak commodity prices on weaker global demand as well as the high base effect recorded last year

- MoM: expanded (5.5%; Jul: 1.3%) for the second straight month and the fastest pace in three months.

● Export growth was weighed down by weak shipment of O&G and non-O&G products and partly due to high base

- Non-O&G (-21.2%; Jul: -18.8%): growth contracted for the third straight month, attributable to a broad-based slowdown, led by weak mining (-33.3%; Jul: -46.2%), followed by agriculture (-30.0%; Jul: -3.3%) and manufacturing (-17.5%; Jul: -9.1%) products. Similarly, subdued demand was recorded across major trading partners, led by Japan (-29.0%; Jul: -33.0%), followed by the US (-17.7%; Jul: -18.9%) and China (-12.8%; Jul: -2.2%).

- O&G (-18.7%; Jul: -12.5%): remained contracted for the six months and weakest since November 2020 due to subdued mining (-32.9%; Jul: -3.8%) amid weak commodity prices. Nonetheless, growth was partially supported by a rebound in manufacturing (11.5%; Jul: -6.8%) products.

● Imports fell sharply (-14.8%; Jul: -8.3%), below consensus (-9.0%) and its third straight month of contraction. Growth was dragged by weak imports of O&G (-28.1%; Jul: -29.7%) and non-O&G (-12.1%; Jul: -2.7%)

- By category, it was a broad-based slowdown led by a decline in growth for raw materials (-20.4%; Jul: -16.7%) and capital goods (-4.0%; Jul: 18.8%) as well as growth moderation in consumer goods (15.6%; Jul: 26.9%)

- MoM: growth contracted (-3.5%; Jul: 14.1%), indicating a weak demand momentum during the month.

● Trade surplus widened to a two-month high (USD3.1b; Jul: USD1.3b), beating consensus (USD1.5b) as imports fell on MoM basis while exports expanded. Meanwhile, total trade fell for the third month (-18.4% YoY; Jul: -13.6%).

● 2023 export growth forecast revised further to -9.3% from -3.4% (2022: 26.1%) amid weaker global trade outlook

- Year-to-date, exports fell by 11.8% YoY largely due to lower commodity prices and subdued external demand, while further compounded by a global economic slowdown led by the slower than expected China's economic recovery. This was further weighed by the impact of a higher interest rate environment, the high base effect recorded last year following global economic reopening, and the release of pent-up demand. Nevertheless, we expect China's economy to continue to recover and positively influence the export landscape in the next three to six months.

Source: Kenanga Research - 18 Sept 2023