Industrial production (IP) rose 6.8% y/y in August, largely supported by the strong output from mining (+5.3% y/y) added with manufacturing (+7.6% y/y) and electricity (+3.0% y/y). Besides, manufacturing sales continued to grow at double digit by 16.5% y/y in August, the ninth consecutive month of double-digit growth with the August PMI reading at 50.4. Despite a better manufacturing output figure in August, we expect its output to grow moderately in 2017. The PMI numbers have not firmly surpassed the expansionary region, only twice i.e. in April and August, due to lack of strong new businesses and export orders. Potential business sentiments in manufacturing is still weak for the first three quarters of 2017. But the sector’s output will continue to benefit from the cyclical recovery coming from the export-led activities and an undervalued MYR based on a basket of currencies with domestic activities complementing.

• Meanwhile, we expect the moderate performance from the manufacturing output will continue to benefit from the cyclical recovery coming from the export-led activities and benefit from the undervalued MYR based on a basket of currencies. This will be in tandem with the strong export and manufacturing numbers. Domestic activities will continue to complement.

• Industrial production (IP) rose 6.8% y/y in August from 6.1% y/y in July, largely supported by the strong output from mining, which is up 5.3% y/y, added with manufacturing (+7.6% y/y) and electricity (+3.0% y/y).

• The improved manufacturing output in August is complemented with the PMI figures which read at 50.4, surpassing the contraction region for the first time since May 2017. Besides, manufacturing sales continued to grow at double digit by 16.5%y/y in August, the ninth consecutive month of double-digit growth.

• Despite a better manufacturing output figure in August, we expect its output to grow moderately in 2017. The PMI numbers have not firmly surpassed the expansionary region – only twice i.e. in April and August – which we believe is due to lack of strong new businesses and export orders owing to weak demand. This explains the less optimistic outlook painted by the manufacturing sector for the first three quarters of 2017.

• Meanwhile, we expect the moderate performance from manufacturing output to continue to benefit from the cyclical recovery coming from the export-led activities and the undervalued MYR based on a basket of currencies. This will be in tandem with the strong export and manufacturing numbers. Domestic activities will continue to complement.

Source: AmInvest Research - 13 Oct 2017