- The Industrial Production Index (IPI) for Malaysia slipped to +4.2% YoY in April as the manufacturing production and electricity output slowed down during the month (March: +4.3%).

-  All three indices of IPI had advanced during the month, which include manufacturing (+4.0% YoY), mining (+4.7%), and electricity (+3.9%).

-  Nonetheless, the manufacturing index of IPI slowed in March and April after registering a healthy growth of 16.0% YoY in February.

-  Also, the manufacturing sales had registered a moderated growth in April. Overall sales grew by 7.7% to RM53.2bil driven by improvements in the E&E segment and refined petroleum products (March: +8.9%).

-  Under the E&E segment, we note that the manufacture of diodes, transistors and similar semiconductor devices had advanced by 29.3% while manufacture of electrical capacitors and resistors grew by 48.4%.

-  Elsewhere, manufacture of refined petroleum products, which accounted for 23.5% of total sales value of manufactured products, rose by 18.4% YoY to RM12.48bil.

-  Particularly, the softer IPI growth and manufacturing sales in April were attributed to the slowdown in domestic demand.

-  Overall exports had advanced in recent months on the back of the pick-up in global demand. Production for export-oriented industries improved by 6.9% YoY in March (vs. +6.6% in February).

-  Production for domestic-oriented industries grew at a moderated pace of 5.0% in March (vs. +20.1% YoY in February).

-  Going forward, the boost in net trades will likely compensate for the softer domestic growth. In nominal terms, we envisage a healthy trade surplus of RM104.2bil in 2014.

-  YTD net trades had amounted to RM35.19bil as at end-April (or an increase of RM17.8bil compared to a year ago).

-  While exports to China could taper in May, overseas shipment to other major trading partners will continue to drive exports growth.

-  The acceleration in high-income economies is an impetus for growth in developing countries. As such, the improvement in economic activities in the US and EU will spur Malaysia’s exports growth.

-  Note that exports to the US and EU had registered negative growth rates of 3.4% and 5.2% YoY respectively in May 2013. Hence, reversal to positive growth rates in May 2014 will bolster Malaysia’s overall exports during the month.

Source: AmeSecurities