Tuesday, 13 June 2017

(The Edge Financial Daily) Malaysia’s April IPI at languid expansion

Industrial Production Index Malaysia’s Industrial Production Index (IPI) in April 2017 stood at 126.4, having recorded a soft growth of +4.2% year-on-year (y-o-y) (March 2017: +4.6%).

The result was once again below our and market consensus expectations. The weaker-than-expected result was dented by shrinkage in the mining index and electricity index.

Besides, compared with the previous month, IPI decreased by 5.2%, weighed down by negative growth for all of its main components.

Despite April’s IPI growing moderately, the manufacturing sector showed a strong expansion. The sector recorded a growth of +6.7% y-o-y (March 2017: +5.9%), supported by the food, beverage and tobacco component, which posted a growth of +15.4% (March 2017: +6.7%). Besides, the uptrend in the manufacturing sector was also underpinned by y-o-y growth of electrical and electronics (E&E) products (+9.7%) as well as non-metallic minerals products, basic metal and fabricated metal products (+9.7%). However, on a monthly basis, the manufacturing sector swung back again to negative growth of -4.1%, due to a decrease in sales value of 8.2% (RM6.5 billion).

E&E products expanded their growth trajectory in April after increasing +9.7% y-o-y (March 2017: +8.5%). This was in line with the findings of the Semiconductor Industry Association as global semi-conductor sales surged strongly by 20.9% y-o-y and 1.3% month-on-month (m-o-m) in March.

The electricity index in April showed a negative growth for the second consecutive month, declining -1.5% y-o-y (March 2017: -0.2%). Compared with the previous month, the reading also tumbled drastically, -2.5% from the previous positive growth of +12.5% in March.

The mining sector fell by -2% y-o-y (March 2017: +2%) and declined by -9.8% m-o-m (March 17: +9.1%). Th e performance was dented by a spiral decrease in natural gas index of 6.6%.

We expect IPI to show a slower y-o-y growth of +4% in May due to weak performances of the mining index and electricity index. However, the expansion of IPI will still be supported by the performance of the manufacturing index as the global semiconductor market has grown at an impressive rate. — JF Apex Securities, June 9