Below expectation – Malaysia’s Industrial Production Index (IPI) in Apr’17 stood at 126.4, having recorded a soft growth of +4.2% y-o-y (vs Mar’17: +4.6%). The result was once again below our expectation and market consensus. The weaker-than-expected result was dented by shrinkage in Mining index and Electricity index. Besides, compared to the previous month, IPI decreased by 5.2% weighed down by negative growth for all of its main components.

Manufacturing sector expanded on y-o-y but contracted m-o-m – Despite April’s IPI grew moderately, the manufacturing sector showed its strong expansion. Manufacturing sector recorded a growth of +6.7% y-o-y (vs Mar’17: +5.9%), supported by the Food, Beverages and Tobacco component which posted a growth of +15.4% (vs Mar’17: +6.7%). Besides, the uptrend in the manufacturing sector was also underpinned by y-o-y growth of Electrical and Electronic products: (+9.7%) as well as Nonmetallic Minerals Products, Basic Metal and Fabricated Metal Products: (+9.7%). However, on a monthly basis, the manufacturing sector swung back again to negative growth of -4.1%, due to decrease in sales value of 8.2% (RM6.5 billion).

E&E continued its positive momentum - E&E products expanded its growth trajectory in Apr’17 after increasing +9.7% y-o-y (vs Mar’17:+8.5%). This was in line with the findings of Semiconductor Industry Association (SIA) as global semiconductor sales surged strongly by 20.9% y-o-y and 1.3% m-o-m in Mar’17.

Electricity index went downhill – Electricity index in Apr’17 showed a negative growth for 2nd consecutive months, declining -1.5% y-o-y (vs Mar’17: -0.2%). As compared to the previous month, the reading also tumbled drastically, -2.5% from previous positive growth of +12.5% in Mar’17.

Mining sector tapered off – The mining sector fell to -2.0% y-o-y (vs Mar’17: +2.0%) and declined to - 9.8% m-o-m (vs Mar’17: +9.1%). The performance was dented by spiral decrease in Natural Gas index of 6.6%.

Slower growth expected in May’17 IPI– We expect IPI will show a slower y-o-y growth of +4.0% in May’17 due to weak performance in Mining index and Electricity index. However, the expansion of IPI still be supported by the performance of Manufacturing index as global semiconductor market has grown at an impressive rate

Source: JF Apex Securities Research - 9 Jun 2017