HLIB trims Q3 GDP growth target to 4.5%

PETALING JAYA: A combination of an only marginally stronger industrial production index (IPI) and weaker growth in the services index has led Hong Leong Investment Bank (HLIB) to lower its third quarter 2015 (3Q15) gross domestic product (GDP) target to 4.5% from 4.7% previously.
Its full-year GDP target however remains unchanged at 5%.
HLIB said on a quarterly basis, the combination of a marginal stronger IPI of 4.5% year-on-year; compared with 4.3% in 2Q15 and weaker services continued to paint a downbeat picture for 3Q15 gross domestic product (GDP).
“In this regard, we maintain our view of a slowdown in 3Q15, tweaking our GDP growth estimate lower to 4.5%, from 4.7% year-on-year previously,” said HLIB.
It added that its full-year GDP growth forecast remains at 5.0%, factoring in a marginal growth rebound to 5.0% in 4Q15.
“Notwithstanding a more moderate growth expectations for 2016 and a series of price hikes (toll, rail fare & cigarette), which has elevated the near-term inflation outlook, we retain our view that Bank Negara Malaysia will continue to stand pat at 3.25% into the first half of 2016,” it said, adding that its view is reinforced by the dovish monetary policy statement last week.
Malaysia’s industrial production index (IPI) is expected to see a challenging near-term outlook despite a rebound in September, HLIB Research said.
“Forward indicators (such as global purchasing managers’ indexes, world chip sales, and business confidence) reflected lackluster global and domestic economic conditions. The persistent downward adjustment in China and subdued commodity price outlook would still undermine global demand ahead,” the research house said in a report yesterday.
IPI growth picked up to 5.1% year-on-year in September, compared with a growth of 2.3% year-on-year in August, exceeding market estimates of a 3.0% year-on-year gain. It was a broad-based expansion, led mainly by the manufacturing sector.
The faster-than-expected IPI expansion in September was largely credited to stronger output growth of export-oriented products; and year-ago low-base effects in mining output.
Services index for the third quarter of 2015 (3Q15) grew at a slower pace of 4.1% year-on-year, compared with 5.1% year-on-year in 2Q15.