RHB optimistic on manufacturing sector based on brighter trade outlook

KUALA LUMPUR: RHB Research has maintained its optimistic view of the manufacturing sector based on a brighter trade outlook.

In a research note, it said export activity has started to gain momentum amid higher outbound shipments of electrical and electronics (E&E) and commodity-based products as illustrated in the recent data.

“The resiliency in capital and intermediate goods imports coupled with the recent pickup of manufacturing sentiment index suggests that there is an improvement in investment appetite as well,” it said.

The research house is also bullish on the prospect of export-oriented industries such as E&E, petroleum and petroleum-based products, as well as metal goods production amid stronger external demand.

“In particular, E&E is expected to be driven by reacceleration in the global technology cycle and higher demand from major trade partners, while commoditybased sectors such as petroleum and petroleumbased products, as well as non-metal mineral and metal products, are expected to gain from higher commodity prices as well,” it said.

RHB said the strengthened Industrial Production Index (IPI) momentum coincided with January’s strong trade figures as export-oriented manufacturing industries accounted for 46 per cent of the total IPI weightage.

According to the Department of Statistics Malaysia (DoSM), the rebounded to 4.3 per cent year-on-year in January 2024, spurred by expansion in all sectors.

Hence, RHB Research said robust domestic consumption and investment activities in 2024 are also anticipated to support the manufacturing sector, in which the investment appetite is improving, as indicated by higher capital goods imports and robust capital formation.

“Further upsides on investment activities would emanate from businessfriendly policies and incentives focusing on priority sectors such as technology, tourism, agriculture as well as those with export capacity,” it said.

RHB Research opined that consumer spending is expected to remain robust amid healthy labour market conditions.

“The export market in Malaysia is expected to benefit from a positive spillover effect amid improved trade performance and manufacturing activities in China,” it added.