MIDF Research optimistic on M’sian industrial performance

PETALING JAYA: MIDF Research remains optimistic on Malaysia’s industrial production index (IPI) performance this year amid the threat of the US-China trade war and declining trend of external trade.

The research house expects the country’s industrial output, as measured by the IPI, to grow by 4.3% this year. The encouraging trend of IPI growth in 2017 is expected to continue this year, given that the robust external trade performance continues and the gradual increase in commodity prices will boost Malaysia’s industrial activities.

While the global trade war could likely weigh down Malaysia’s IPI performance, MIDF Research said it would rebound in the second half of 2018 as the trade war tapers down. There is less market uncertainty post-general election and the continuous gradual rise in commodity prices.

“Despite the 4.2% year-on-year (y-o-y) growth in the first two months of 2018, we remain optimistic on the IPI performance this year. As guided by the recent Business Tendency Index data, we believe the IPI growth will be growing between 3.5% and 4.5% during the first half of 2018.

“Based on the solid uptrend in trade activities and further steady domestic consumption, we expect industrial production growth to hit 4.3% this year. Nevertheless, headwinds from global trade tensions could pose a threat to the estimate,” it said in a note.

On February’s IPI growth, the research house pointed out that Malaysia’s industrial production expanded by 3% y-o-y, lower than market expectations of 3.2%.

“Moving forward, we foresee the IPI performance expanding at a moderating pace for the first half,” said MIDF Research.

The Statistics Department said in a statement yesterday that the expansion in February was supported by growth in the manufacturing index (4.7%) and the electricity index (2.8%).

However, the mining index recorded a decline of 1.6%.

The main sub-sectors which recorded increases in February were petroleum, chemicals, rubber and plastic products (7%), electrical and electronic equipment products (5.4%), and non-metallic mineral products, basic metal and fabricated metal products (5%).

The department said the mining sector output fell by 1.6% in February mainly as a result of the 3.5% decrease in the natural gas index. Meanwhile, the crude oil index rose by 0.5%.

MIDF Research projects a slight slowdown in global industrial activities moving forward.

“Growing inflationary pressure and a rising trade war are two major factors spooking global industrial and trade activities during the first half.

“Nevertheless, we view the global industrial activities as remaining on a steady path, given that the manufacturing Purchasing Managers’ Index for both global and emerging economies stayed above 50 points in March, at 53.4 and 51.3 points, respectively,” it said.