-  The Industrial Production Index (IPI) for Malaysia registered a growth of 4.8% YoY in December vs. both our and consensus estimates of 5.3%.

-  The YoY IPI growth was contributed by the manufacturing and electricity sub-segments, which advanced by 6.7% and 6.0% respectively. Meanwhile, the mining index had declined by 0.8% YoY.

-  Separately, we note that overall manufacturing sales surged by 5.4% to RM55.4bil in December (November: +4.7%). In 2013, the sales value of the manufacturing sector grew by 0.2% to RM624.4bil.

-  In the mining sector, the natural gas index showed a healthy growth of 11.1%. Contrastingly, the crude oil index posted a broader contraction of 6.2% in December (vs. -1.7% in November).

-  All in all, IPI had advanced by 2.8% in 2013. The expansion was contributed by the increases in all indices including manufacturing (+3.2%), mining (0.4%) and electricity (5.5%).

-  Note that the production of domestic-oriented industries has improved in November. The latest available data for the month of November showed that industrial production for domestic-oriented segments grew by 6.4% (October: -0.4%).

-  Overall exports had also advanced in recent months due to the pick-up in global demand. As a recap, exports accelerated by 14.4% in December.

-  Nonetheless, production for export-oriented industries had moderated to +7.8% YoY in November (vs. +14.3% in October).

-  We foresee Malaysia’s factory output and exports growth to remain strong in the next three to six months as the global economy gains traction.

-  Owing to the rebound in the domestic-oriented industries in November, we believe that aggregate domestic demand had probably advanced, albeit at a moderated pace of 6.0% in 4Q13 (3Q13: +8.3% YoY).

-  With that, GDP in 4Q13 is likely to grow by 5.7% YoY instead of our earlier expectation of 4.8%. In 3Q13, GDP grew by 5.0% YoY.

-  Based on our estimates, the full-year 2013 GDP will probably advance by 4.8% compared to our earlier projection of 4.6% (2012: +5.6%).

-  We are taking this opportunity to review 2014’s GDP forecast as well. Considering the improvements in overall factory output and surplus through trade, we envisage a stronger growth of 5.1% in 2014 (from 4.8% previously).

Source: AmeSecurities