-  The Industrial Production Index (IPI) for Malaysia accelerated in August to register a growth of 6.5% YoY, driven by the manufacturing, electricity and mining segments (July: +0.6%).

-  All three indices of IPI had advanced during the month – manufacturing grew by 7.4% YoY, mining (+3.6%), and electricity (+8.4%).

-  In July, the manufacturing/mining/electricity indexes grew by 3.2%/-7.8%/4.9% YoY respectively.

-  For the manufacturing segment of IPI, we note that the Electrical and Electronics Products grew at a faster pace of 11.8% in August vs. 7.9% in July.

-  Elsewhere, manufacturing sales value registered a growth of 5.0% YoY totalling RM55.8bil in August (vs. July’s growth rate of +1.6% YoY).

-  We note that the boost in factory output was driven by the domestic demand and export order for E&E products during the month.

-  Note that manufacturing sales had improved in August in tandem with the uptick in IPI during the month.

-  Malaysia’s industrial production is probably preparing for higher orders in the coming months.

-  In particular, the manufacture of E&E products had registered a stronger production growth in August, partly due to the improvement in exports of E&E.

-  Under the E&E segment, we note that the sales value for diodes, transistors and similar semiconductor devices had advanced at a softer pace of 18.8% YoY to RM5.1bil (July: +9.5% YoY).

-  Also, electrical capacitors and resistors posted an advancement of 39.2% to RM2.9bil (July: +32.9% YoY)

-  Aside from that, sales value of passenger cars had registered a healthy growth of 31.3% YoY to RM2.1bil (July: -0.2% YoY).

-  Based on the IPI for export-oriented industries for the month of July, growth had tapered to +3.0% (June: +8.2% YoY).

-  The domestic oriented industries had also registered a moderated growth of 3.2% in July vs. +12% in June, owing to the slower demand for consumer products and softer growth in the construction segment.

-  That said, industrial production is likely to be less dependent on exports growth owing to the slowdown in global demand.

Source: AmeSecurities