Bright Spot For Malaysia Despite Global Shipping Dynamics

A downward revision by the WTO for global merchandise trade volume growth in CY24 to 2.6% (from 3.3%), exacerbated by lower water levels in the Panama Canal due to extreme drought, hinders shipping movements, as cited by Kenanga Investment Bank (Kenanga) in its Malaysia Seaport & Logistics Sector Update today (9 July 2024).

The House maintains a neutral outlook, acknowledging challenges amidst shifting global trade dynamics.

The prolonged shipping diversion from the Red Sea continues to weigh on global trade, particularly impacting the Asia-Europe sector, where vessels rerouted via the Cape of Good Hope have extended voyage times and reduced port calls, affecting regional port operations including Malaysia’s Westports.

Stricter regulations on carbon emissions, including the IMO and EU’s initiatives, pose additional uncertainties for the seaport and logistics sectors, potentially impacting container throughput to the EU and necessitating compliance measures for international shipping fleets.

Despite these challenges, Kenanga highlights a bright spot in the domestic logistics sector, buoyed by the flourishing e-commerce landscape in Malaysia, expected to grow GMV at a CAGR of 7% to RM1.9t by 2027, driving demand for distribution hubs and efficient warehousing solutions.

The logistics sector’s resilience amidst global headwinds and its strategic alignment with Malaysia’s growing e-commerce sector presents opportunities for long-term investors seeking exposure to domestic-driven growth.

Kenanga does not currently recommend a top pick within the sector, maintaining a cautious stance amid ongoing global uncertainties and regulatory developments impacting international trade and logistics operations.

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