Sectors to Keep an Eye On in 2024?

As the post-pandemic boom subsides, attention is turning to sectors with long-awaited project roll-outs, such as oil and gas, construction and power.

The Edge Malaysia had  a brief look at the key sectors to watch out for:

(i) O&G: Sustained activities?

Upstream oil and gas (O&G) companies in Bursa Malaysia are anticipated to continue benefiting from elevated activity levels. This is despite pressure on oil prices to go below US$80 per barrel, compared with over US$100 in 2022.

The Petronas Activity Outlook 2024-2026 report, which lays out the national oil company's expected activity levels in the next three years, suggests sustained or higher capex spending as it targets a production of two million barrels per day by 2025, up from 1.7 million currently.

As to whether oil prices can stay around US$80 per barrel will depend on whether OPEC+ members will undertake voluntary cuts, as was done in 2023, in anticipation of some demand headwinds — which have emerged in the downstream segment.

Source: https://www.upstreamonline.com

(ii) Power: Anticipating new quota, project roll-outs

Power sector players such as local utility companies, solar asset owners and contractors, saw strong share price gains in 2023 due to a boost in sentiment. The government's adoption of policies to accelerate RE adoption through bigger RE projects and exports of low-carbon electricity to neighbouring Singapore  were added boost.

All eyes will be on the roll-out of new projects and quota, including the Net Energy Metering (NEM) quota required for rooftop solar installations, as well as upcoming large-scale solar (LSS) projects to cope with the very high demand anticipated in Malaysia and its neighbouring countries.

Ahead of the rollout of new LSS projects, implementation of the corporate green power programme (CCGP) would see an estimated RM2.7 billion to RM3 billion of contracts to come.

(iii) Healthcare: Opportunities aplenty 

Even as the Covid-19 pandemic reaches manageable levels globally, the fear of new virus variants and the disease's lingering effects still looms, especially among the elderly, which provides opportunities to healthcare players.

Concurrently, the recent spike in Covid-19 cases has rekindled investors' interest in rubber glove stocks that recorded a spectacular outperformance in 2020-2021.

(iv) Construction: Hope on project flows

Sentiment is bullish in the construction sector for 2024, backed by a strong pipeline of infrastructure projects, and rising demand for industrial buildings such as warehouses, data centres and semiconductor plants.

Mega projects that the market is anticipating include the RM45 billion MRT3 Circle Line, for which the MRT Corp recently sought a three-month extension till March to finalise tenders for the project and the RM9.5 billion Bayan Lepas LRT in Penang that will receive financial backing from the federal government.

On top of that, there will be the rollout of six flood mitigation projects reportedly to be worth RM13 billion including in Johor, Selangor and Kelantan.

(v) Property: Infra boom to rejuvenate demand

Catalysts for the property sector in 2024 include signals from Bank Negara Malaysia to continue pausing rate hikes, potential rate cuts by the US Federal Reserve, the slew of major infrastructure projects and favourable government policies.

Major projects present opportunities for developers to launch high-value transit oriented developments, including the Bayan Lepas Light Rail Transit (LRT), the Johor Bahru-Singapore Rapid Transit System or RTS Link, and a potential revival of the Kuala Lumpur-Singapore High Speed Rail project. 

Government measures that are a boon for the sector include the formation of a Johor-Singapore Special Economic Zone (JSSEZ) down south that is intended to support Singapore’s industrial sector with an emphasis on renewable energy, which has spurred interest in real estate within Iskandar Puteri.

In addition, the revamped multi-tier Malaysia My Second Home (MM2H) programme could boost demand for more premium homes in Kuala Lumpur, Penang and Johor.

(vi) Tourism: Higher tourist arrivals

Malaysia’s tourism industry is expected to continue its recovery and surpass pre-pandemic levels in 2024, analysts said. The recent relaxation of visa entry for tourists from China, India and Middle East countries and better flight connectivity will also drive the resurgence in Malaysian tourism.

(vii) Aviation: Encouraging signs 

With the continued revival of the tourism sector, the aviation industry has continued to rebound. MIDF Research predicts a surge in Malaysia's airline traffic, lifted by visa-free deals with China, India and the Middle East.

(viii) Plantation: El Niño seen slashing production, lifting prices

The El Niño is expected to reduce crude palm oil (CPO) production, which could lead to a subsequent increase in CPO prices by 2024. This typically creates favorable conditions for plantation companies but analysts remain neutral on the sector, saying the wider impact of the weather phenomenon has to be closely monitored. CIMB research forecasts that average CPO prices will increase by 5% to RM4,000 per tonne in 2024 from RM3,800 per tonne in 2023.

(ix) Technology: After a dismal 2023, observers eye upcycle

Outlook “may remain tepid in 1H2024 before picking up in 2H”, while some suggest “the great rebound could only be seen in 2025,”  MIDF Research said. The pace of recovery for different semiconductor subsectors and firms may vary.

(x) Automotive: Uncertainty?

After two years of strong sales, the automotive industry is facing uncertainty in 2024 with analysts foreseeing challenges as the country overhauls its fuel subsidies, potentially impacting the sector's growth. 

Many sector analysts are optimistic but some remain rather cautious. The larger play remains global geo-politics, local sentiments and regional political changes expected in neighbouring countries.

Reference:

Sectors to keep an eye out for in 2024 as post-pandemic boom subsides, Adam Aziz, Emir Zainul, Lam Jian Wyn, Anis Hazim, Syafiqah Salim, Izzul Ikram, Isabelle Francis and Chester Tay, The Edge Malaysia, 4 January 2024