The investment bank holds a positive outlook for the industry, buoyed by the strengthening of trade momentum extending beyond the fourth quarter of this year (Q4 2023).

This is supported by the resilience of US and regional economies, global technology cycle rebound, and early signs of recovery in China.

“Downside risks to our sector call are slower-than-expected recoveries of trade activities and the tourism industry,” it said.

RHB IB highlighted that the stronger-than-expected October data and an overall improvement in trade momentum in recent months had affirmed the early indications of a trade recovery.

“Significant increases in outbound shipments, especially to major destinations like China, have been observed.

“We maintain the expectation of a smaller contraction in export data by Q4 2023, expressing the potential for export data to turn positive in the first quarter of 2024 (Q1 2024),” it said.

The research house also added that China’s economic growth is exhibiting early signs of recovery.

“This is evident in the improvements in retail spending and industrial activities.

“The anticipated higher demand from China is expected to contribute to the ongoing export recovery in Q1 2024 and beyond,” it added.

On the freight rates, due to overcapacity and subdued demand, ocean freight rates persist at a depressed level.

Notably, it said specific routes experienced a decline in freight rates to below pre-pandemic levels.

“However, for air freight rates, the air cargo capacity continued its ascent in the third quarter of 2023 (Q3 2023), propelled by the recovery of passenger air services, particularly the belly capacity,” said RHB IB.

In November 2023, air freight average rates rose 7.9% month-on-month, likely attributed to seasonal demand on specific trade lanes.

This increase is coupled with a slight capacity reduction as some airlines scale back passenger flights during winter.