MIDF Amanah Investment Bank Bhd expects Malaysia’s trade performance to gradually improve in the second half of 2020 in line with improving sentiment in most Asian economies due to the recovery phase post-Covid-19 pandemic.
It said, however, the reemergence of US-China tensions, China-India war, and fear of a second Covid-19 wave are downside risks to the estimate.
The Malaysia Manufacturing Purchasing Managers’ Index (PMI) surged to 51 in June 2020 from 45.6 in the previous month, the highest recorded since September 2018.
MIDF Amanah said the manufacturing sector was among the most affected sectors during the movement control order (MCO) due to lower domestic and global demand.
“Given that approximately 80% of our exports are manufactured goods, with the MCO being lifted in stages, allowing more businesses to resume operations, we foresee June’s improved performance as the beginning of the recovery phase post-pandemic,” said MIDF Amanah in a note.
A similar trend was also observed in most Asian economies such as China (51.2 vs 50.7), South Korea (43.4 vs 41.3), India (47.2 vs 30.8), Thailand (43.5 vs 41.6), the Philippines (49.7 vs 40.1), Taiwan (46.2 vs 41.9) and Vietnam (51.1 vs 42.7).
Public Investment Bank, however, said there could be an uneven recovery in Malaysia’s manufacturing sector given the strong Covid-19 headwinds.
The bank said although Malaysia appears close to winning its war against Covid-19, this is not the case for its major trading partners like Singapore, China, the US, the Eurozone and Japan.
“Weak external demand may continue and could be a drag on the headline index. Volatility in our Manufacturing PMI should, therefore, be expected,” it said.