● Industrial Production Index (IPI) sustained a growth of 1.7% YoY in September (consensus and house estimate: 1.9%)

- Rebound in electricity and lessened decline in mining equally outweighed further moderation in manufacturing.

- MoM: remained in contraction for four straight months (-0.3%; Aug: -0.3%).

- Year-to-date:softened to 2.7% YoY (Jan-Sep2018:2.9%), in line with expectation of growth slowdown.

● Manufacturing index YoY growthsoftened to a 41-month low (2.5%; Aug: 3.6%)

- Led by weakening in the export-oriented sub-sectors, in particular electrical & electronic products (E&E) (0.8%; Aug: 3.1%) and petroleum, chemical, rubber and plastic products (2.1%; Aug: 3.0%).

- In line with the sluggish manufacturing sales (2.9%; Aug: 4.5%) and E&E (-12.2%; Aug:-7.4%) on the back ofdownturn in the global chip market.

● Mining index further narrowed its contraction (-1.6%; Aug: -3.9%)

- Steered by improvement in crude petroleum output (-4.7; Aug: -9.7%) and extraction of crude oil and natural gas (-1.6%; Aug: -3.9%), in part due to a low base.

- Will remain pressured in the near term following OPEC+ compliance to trim about 1.2m barrels a day through March 2020.

● Electricity index rebounded to four-month high (4.1%; Aug: 0.3%)

- Spiked up as hazy conditions during the month led to higher usage of air-conditioners and air purifiers.

● Outlook of a subdued industrial production in the immediate term maintained

- Manufacturing PMI remained in contraction for 13 successive months (49.3; Sep: 47.9), albeit at a smaller pace in October.

- Economic growth faltered in major markets, including China and the EU.

- Elevated uncertainty regarding the signing of the phase-1 US-China trade deal, with existing tariffsexpected to hampertrade activities.

- As external weakness trickles down to the domestic side, GDP growth would likely extend its slowdown into the 3Q19 to 4.4% from 4.9% in 2Q19, adding to our whole year projection of 4.5% (2018: 4.7%).

Source: Kenanga Research - 12 Nov 2019