MANUFACTURING SECTOR MUTED IN NEAR TERM, GAINS MOMENTUM LATER IN YEAR - HLIB

Malaysia's manufacturing sector is expected to remain muted in the near term before gaining momentum this year following an anticipated turnaround in trade activities and semiconductor demand, said Hong Leong Investment Bank Bhd (HLIB).

In a note, the bank said global factory activities remained lackluster with December's manufacturing Purchasing Managers' Index (PMI) still in contraction territory.

"With new orders on a sustained downward trend, producers continue to rely on back orders to avoid a steeper decline in output," it said.

Meanwhile, Public Investment Bank Bhd anticipates sustained positive growth in the Industrial Production Index (IPI) in the fourth quarter of 2023 despite a global demand slump versus the same period a year ago due primarily to a base effect.

"Nevertheless, we expect the industrial sector is poised for a resurgence in 2024," it added.

Kenanga Research, meanwhile, anticipates a manufacturing sector recovery amid the expectation of a technology upcycle, particularly in the second half (2H) of 2024 and China's gradual post-pandemic recovery.

This, along with a resilient services sector, is expected to boost 2024 gross domestic product (GDP) growth to 4.9% from an estimated 3.5% to 4.0% in 2023, said the research house.

"Overall, the 2023 manufacturing index growth may settle around our forecast of 1.0% (2022: 8.2%). We are revising the 2024 forecast to expand to 4.6% from 3.2% in anticipation of a robust recovery in the 2H 2024," it said.