-  The Industrial Production Index (IPI) for Malaysia registered a growth of 1.0% YoY in September, which came in below our and street estimates of 3.0% and 2.5% respectively. The IPI in August has been revised upwards by 0.4pp to +2.7%.

-  The YoY IPI growth was contributed by the manufacturing and electricity sub-segments, which advanced by 2.4% and 4.0% respectively.

-  The major contributors to manufacturing growth include petroleum, chemical, rubber and plastic products (+3.2%); electrical and electronics products (2.4%) and transport equipment and other manufactures (15.1%).

-  However, we note that the manufacturing subdivision had moderated during the month of September. Manufacturing production growth had softened to 2.4% from 4.6% in August.

-  Also, overall manufacturing sales grew at a slower pace of 1.5% to RM53.5bil in September (August: +5.5%). As at YTD, the sales value of the manufacturing sector declined by 1.0% to RM461.6bil.

-  Meanwhile, the mining sector posted a contraction of 4.2% during the month. The output for mining sector fell due to contractions in crude oil and natural gas by 4.1% and 4.5% respectively.

-  Although production for domestic use had remained intact as at YTD August, consumption activities will probably slow down in 4Q13.

-  Nevertheless, we envisage international trade to be supportive of growth in 4Q13. As such, growth in the manufacturing segment will rely extensively on external demand going forward.

-  Based on the latest available data for the month of August, industrial production for domestic-oriented segments had advanced at a modest pace of 3.5% (July: +5.8%).

-  Contrastingly, the export industries stayed strong in August as production grew by 5.0% during the month of August (July: +5.0%).

-  Despite the YTD decline in exports by 0.2%, IPI had advanced by 2.4% as at YTD September 2013. In 3Q13, IPI expanded by 3.7% driven in part by growth in export-oriented industries. 

Source: AmeSecurities