November’s Industrial production (IP) accelerated to 5.0% y/y driven by manufacturing output which expanded by 6.8% y/y with both the output from mining and electricity rising moderately by 0.2% and 3.9% y/y respectively. Supporting the strong manufacturing output is manufacturing sales which continued to grow at double digits for the 12th consecutive month, up 10.9% y/y. We believe the growth is being supported by the continued strong global demand for electronics, intra-regional trade flows and resource-based products. We expect the positive manufacturing momentum in terms of production and sales to continue given that imports are growing at a healthy pace, up 15.4% y/y in November largely coming from capital imports (+12.2% y/y) and intermediate goods (+13.8% y/y). Hence, we reiterate our 2017 and 2018 GDP outlook of 5.9% and 5.5% respectively. Besides, we foresee a stronger USD/MYR outlook for 2018 with our end-period projection at 3.95 and full-year average at 4.00-02 as our base case while the best case for end-period is 3.76 and fullyear average at the 3.80–82 levels.

• November’s Industrial production (IP) accelerated to 5.0% y/y from 3.4% y/y in October driven by manufacturing output which expanded by 6.8% y/y from 4.2% in October. Meanwhile, the production from both mining and electricity rose moderately by 0.2% y/y and 3.9% compared to 0.8% and 4.6% in October respectively.

• Supporting the strong manufacturing output is manufacturing sales which continued to grow at double digits for the 12th consecutive month. November’s manufacturing sales gained by 10.9% y/y from 11% y/y in October. We believe sales are being supported by the continued strong global demand for electronics, intra-regional trade flows and resource-based products.

• We expect the positive manufacturing momentum in terms of production and sales to continue. We found imports is growing at a healthy pace of 15.4% y/y in November from 20.9% y/y in October largely coming from capital imports up 12.2% y/y from 5.1% y/y in November as well as intermediate goods up 13.8% y/y from 14.8% y/y in October.

• We believe the domestic economy will continue to perform strongly with our full-year 2017 real GDP projected at 5.9% and exports to grow by 21% y/y. For 2018, our GDP outlook is 5.5% supported by domestic activities with exports to grow around 5%–6% partly due to a high base. We expect the USD/MYR to remain on a strong note with our end-period projection at 3.95 with the full-year average at 4.00-02 which is our base case. Our best case end-period for USD/MYR is 3.76 with the full-year average at the 3.80–82 levels.

Source: AmInvest Research - 12 Jan 2018