Malaysia’s recent industrial output data underscores the economy’s resilience, which will continue to position it well to buffer external headwinds, according to Hong Leong Investment Bank.
HLIB noted that the industrial production index (IPI) surged to a new high of 6.0% year-on-year (y-o-y) in October, underpinned by a robust global tech upcycle.
"In addition, Malaysia’s October IPI marked its strongest growth since September 2022, underscoring the economy’s resilience against external headwinds, supported by the ongoing global tech upcycle," it said in a note on Monday.
HLIB added that despite a slight slowdown in the global manufacturing purchasing managers index to 50.5 in November, the rebound in the future output index signals continued strength in production globally, further supporting Malaysia’s industrial momentum.
“We opine that Malaysia is well positioned to weather global economic turbulence on the back of its diversified economic structure and resilient domestic demand,” the research house said.
As such, the house expects Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) at 2.75% through 2026.
"In light of consistent outperformance of IPI and trade data, we maintain our expectation for BNM to keep the OPR steady at 2.75% until end-2026,” it added.
In a separate note, CIMB noted that the strong IPI also contributed to a 0.3% gain in the ringgit against the US dollar, with USD/MYR falling below 4.10, even as global markets faced volatility.
The research house highlighted that US equities tumbled on concerns over artificial intelligence margin compression, while US Treasuries twist-steeped following the Federal Open Market Committee statements.
Meanwhile, HLIB noted the stronger IPI performance was driven primarily by manufacturing, which offset moderation in mining and electricity output.
Manufacturing output expanded 6.5% y-o-y, underpinned by gains in both export-oriented and domestic-oriented segments.
HLIB attributed the export-led strength mainly to a sharp pickup in electrical and electronics production, which surged 13.4%.
Domestic-oriented industries were supported by stronger output in food, beverages and tobacco, as well as non-metallic mineral and fabricated metal products, although growth in transport equipment softened sharply due to a contraction in motor vehicle production.
Mining sector growth moderated to 5.8% y-o-y, reflecting normalisation from a low base, while electricity production growth eased to 1.2%.
On a seasonally adjusted basis, the overall IPI rebounded 0.6% month-on-month, reversing a contraction in the previous month as manufacturing activity returned to expansion.
Source: theedgemalaysia