Kenanga Investment Bank (Kenanga) today maintained a NEUTRAL rating on the Seaport & Logistics sector, noting ongoing challenges from global shipping diversions and environmental regulations impacting trade routes. The redirection from the Red Sea has prolonged shipping times, particularly affecting the Asia-Europe corridor, amidst a projected slowdown in global merchandise trade growth for CY24 due to disruptions in Panama Canal operations.
The World Trade Organisation (WTO) revised its forecast for global trade volume growth to 2.6% from an earlier 3.3%, citing reduced water levels in the Panama Canal due to severe drought conditions. This compounded the effects of shipping diversions via the Cape of Good Hope, dampening the efficiency of shipping lines operating in the region.
Stricter carbon emission regulations from the International Maritime Organization (IMO) and the European Union’s Carbon Border Adjustment Mechanism (CBAM) present additional challenges. These regulations mandate improved carbon intensity for ships and impose carbon pricing on imports to the EU, potentially impacting container throughput from Asia to Europe, especially affecting major exporters like China.
Despite these challenges, Kenanga highlights a bright spot in Malaysia’s domestic logistics sector, bolstered by the thriving e-commerce market. With local e-commerce projected to grow at a 7% CAGR, reaching RM1.9 trillion by 2027, there is increasing demand for distribution hubs, warehouses, and cold-storage facilities to support efficient supply chain management and just-in-time delivery strategies.
Kenanga maintains a NEUTRAL outlook on the Seaport & Logistics sector, refraining from identifying any top picks. The sector’s performance is likely to hinge on navigating global trade disruptions and adapting to stringent environmental regulations while capitalising on the opportunities presented by Malaysia’s burgeoning e-commerce landscape.
