Seaport trade is as steady as she goes

However, the air travel industry is still in a survival mode, suffering from a cash crunch and cross-border travelling,restrictions, AmInvestment Bank said .

PETALING JAYA: The seaport segment of the transportation and logistics industry is on a firm and sustainable recovery path, in line with the reopening of global economies, coupled with a decent peak year-end holiday season, according to AmInvestment Bank.

The research house, which upgraded its call on the sector from “underweight” to “neutral”, said the logistics segment continued to benefit from a surge in e-commerce demand fuelled by the pandemic.

However, the air travel industry is still in a survival mode, suffering from a cash crunch and cross-border travelling restrictions.

AmInvestment Bank said the pandemic, as well as the increased trade tensions between major economies, would reshape the global supply chain, resulting in a diversion of investments away from China to the South-East Asian region, boosting container throughput in the region.

“According to the United Nations Conference on Trade and Development, the world output growth is projected to be more resilient in developing countries compared to developed countries.

“It is forecasting the Asian region to have output growth of 6.3% year-on-year (y-o-y) for FY21, versus a 4.1% y-o-y growth globally.

“We believe this was mainly because the developing countries are home to many suppliers in the fast-growing sectors such as communication equipment, semiconductors, textile and apparels, which will contribute positively towards the growth in container trade volume, and thus the container throughput volume at the ports in the region.

“As of the third quarter, some of these sectors have already registered positive growth year-on-year, communication equipment at 8% and textiles and apparel at 3%, ” said AmInvestment Bank.

In FY20, the output growth for the Asian region shrank by a marginal 0.9% y-o-y, compared with a 4.3% y-o-y contraction globally.

Meanwhile, the crowded local logistics sector continues to be weighed down by cut-throat competition, resulting in severe squeeze in margins.

To this, AmInvestment Bank believed that logistics players would continue to focus on improving their service level and operational efficiencies to gain market shares and improve margins, which is critical for the players to survive in the overcrowded space, and eventually benefit from the e-commerce boom.

As for air travel, the research house said domestic and regional air travel could bounce back strongly if the pandemic was effectively contained either by way of contact tracing or the availability of vaccines.

“We project the domestic air travel demand to recover to pre-Covid levels by 2022, while expecting the international air travel demand to only recover fully by 2024, ” it said.

In China, weekly domestic flights have already recovered to the pre-Covid level, registering an estimated 4% growth y-o-y, as at the second week of October.

According to data published by Lufthansa Innovation Hub, China’s domestic flights were mainly driven by the Golden Week holidays as the country celebrates its national day with a week-long holiday.

On the other hand, recovery for international flights remains slow at about 6% of pre-Covid levels.

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