KUALA LUMPUR (Nov 4): Malaysia’s manufacturing sector is still on the path to recovery, economists said in brushing aside another month of contraction in purchasing activity data.
China’s expected recovery from stimulus measures and a broader technology upcycle will help Malaysian manufacturers regain traction by year end, Kenanga Investment Bank said in a note. Domestic demand meanwhile will be supported by policy measures such as cash transfers, it said.
“Manufacturing conditions are expected to remain stable, supported by improvements in the export-oriented sector as China’s economy recovers due to stimulus measures,” Kenanga said.
Malaysia's manufacturing conditions remained soft in October, as firms scaled back output amid muted demand. The seasonally adjusted purchasing managers index (PMI) was 49.5 in October, unchanged from September’s level, according to S&P Global that compiles the gauge.
A reading above 50 points indicates activity expansion, while a reading below 50 points to contraction in the sector. Factory activity in Malaysia declined for the fifth straight month in October amid weak demand, even as export-oriented factories continued to hum.
Economists also pointed to a rise in new orders for the first time since June, as well as export demand that has expanded for seven months straight in October.
“Looking ahead, new order growth is expected to continue over the coming year,” TA Securities said.
Recovery prospects are “encouraging”, bolstered by stable domestic demand, modest net export gains, and a global semiconductor recovery, BIMB Securities said, highlighting a 10% growth in electrical and electronics sales in August and a 21% rise in global semiconductor sales for the same month.
“Growth in the manufacturing sector will be further aided by the global surge in demand for artificial intelligence adoption,” BIMB added.
Across Asia, PMI data showed mixed conditions, with China’s manufacturing sector showing signs of recovery, with its official PMI edging up to 50.1 boosted by stimulus measures that have begun to take effect.
Vietnam also saw a robust rebound, with its PMI rising to 51.2 after a slump caused by Typhoon Yagi. This recovery was driven by stronger new orders and increased production output, as firms resumed operations at higher capacities.
However, other Asean countries experienced stagnation, with Indonesia’s PMI remaining unchanged at 49.2, while Thailand’s PMI hovered at 50.0.