Malaysia's November 2015 industrial production due today will likely disappoint

Malaysia's November 2015 industrial production due today will likely disappoint. Headline number is expected to moderate to 3.1% YoY, from 4.2% in the previous month and below consensus forecast of 4.0%. The softer industrial output growth stems mainly from weaker external demand, which has been manifested in the export performance in the same month. 

The export growth disappointed with a 6.3% YoY rise despite consensus forecast of double digit expansion in November. Although a six plus per cent rise is encouraging given an uncertain global environment, one has to consider the supposedly strong lift valuation lift from the sharp ringgit depreciation. 

Ringgit has weakened sharply against the USD over the past year. And domestic trade data are cited in local currency terms while most international trade are quoted in USD terms. So, the sharp depreciation in the ringgit should right fully bring about a strong export growth figure when expressed in local currency terms. That was the case over the past 2 few months when export growth was averaging 12.7% YoY. For export growth to come in at half the past two month's pace despite the undervalued currency, demand must have been really weak. 

The PMIs of key markets such as Singapore, the US and China, remained stuck in contraction territory while the SEMI book-to-bill ratio is reflecting a down-cycle in the electronics industry. Against the backdrop of a dicey external environment, expect some moderation in the headline industrial production figure today.