Cautious outlook for manufacturing sector remains

While the manufacturing sector’s business environment may improve in the coming months, backed by domestic-oriented activities, Kenanga Research remained cautious on its outlook. — Picture by Azinuddin Ghazali
While the manufacturing sector’s business environment may improve in the coming months, backed by domestic-oriented activities, Kenanga Research remained cautious on its outlook. — Picture by Azinuddin Ghazali

KUALA LUMPUR, Aug 4 — While the manufacturing sector’s business environment may improve in the coming months, backed by domestic-oriented activities, Kenanga Research remained cautious on its outlook.

The research house said a resurgence in Covid-19 infections and elevated geopolitical tension would weigh on the external demand, subsequently hampering the recovery of the export-oriented manufacturing sector.

“Against this backdrop, we retain the value-added manufacturing growth forecast at -6.3 per cent in 2020,” it said in a note today.

Meanwhile, Malaysia’s manufacturing purchasing managers’ index (PMI) inched back to the neutral level in July at 50.0 after it rebounded sharply to 51 in June from 45.6 in May.

The rebound was mainly due to the further relaxation of restrictions on business activities under the recovery movement control order (RMCO).

Meanwhile, MIDF Investment said although the country’s manufacturing PMI had marginally declined in July, it still remained on a high note compared to the previous MCO phases.

“As long as it hovers between 49-50, it’s still considered good for Malaysia’s case.

“Although most businesses have resumed, they are not operating at full capacity yet due to the effect of certain precautionary measures in place,” it said in a note today.

Meanwhile, the research house said it expects global manufacturing activities to increase gradually, translating into better trade flows in the second half of 2020.

“However, concerns over new wave of Covid-19, increasing protectionism and geopolitical tensions are downside risks to the estimate,” it said. — Bernama

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