- The Industrial Production Index (IPI) for Malaysia registered a growth of 4.3% YoY in March vs. ours and consensus estimates of 2.0% and 4.5% respectively.

- The YoY IPI growth was contributed by the indices of manufacturing (+6.4% YoY) and electricity (+4.6%). On the other hand, mining had contracted by 0.9% due to the decrease in production of crude oil (-1.5% YoY) and natural gas (-0.4%).

- Overall exports had advanced in recent months on the back of the pick-up in global demand. Production for export-oriented industries improved by 7.5% YoY in February (vs. +7.1% in January).

- Production for domestic-oriented industries had also accelerated by a healthy 17.1% in February (vs. -1.2% YoY in January).

- Separately, we note that overall manufacturing sales had registered a moderated growth in March as domestic growth softened. Sales grew by 10.1% to RM56.5bil in March (February: +16.1%).

- Manufacturing sales in March were mainly driven by improvements in the E&E segment and refined petroleum products.

- Manufacture of diodes, transistors and similar semiconductor devices/ electrical capacitors, and resistors/ consumer electronics had advanced by 52.8%, 61.7%, and 47.1% YoY respectively.

- Elsewhere, manufacture of refined petroleum products, which accounted for 22.8% of total sales value of manufactured products, rose by 1.7% YoY to RM12.91bil in March.

- We note that manufacturing wages slowed and total number of employees in the manufacturing sector had contracted in March. Wages grew by 4.5% YoY to RM2.9bil while total employees decreased by 0.1% YoY to 1.025 mil persons.

- Ahead of the statistical release of GDP on 16 May, we expect the Malaysian economy to grow by 5.2% in 1Q14 on the back of a healthy trade surplus (4Q13: +5.1%).

- The slowdown in domestic growth will likely be compensated by the boost in net trades. In nominal terms, trade surplus could amount to RM104.2bil in 2014 (2013: RM70.63bil).

- That said, weaknesses in imports during the month of March suggest that overseas shipment will probably slow down in the coming months.

- For 2014, we envisage aggregate domestic demand to grow by 4.7%, accounting for 92.8% of total GDP. Note that aggregate domestic demand surged by 7.6% in 2013.

- No change to our full-year GDP growth projection of 5.1% for 2014 (vs. 4.7% in 2013).

Source: AmeSecurities