Domestic Logistics Outperforms Amid Global Trade Slowdown

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GLOBAL trade has deteriorated sharply due to a surge in tariffs, trade policy uncertainty, and the shipping diversion from the Red Sea continuing to weigh down on global trade, especially the Asia-Europe routes.
The diversion from the Suez Canal to the Cape of Good Hope has resulted in longer voyages for the Asia-Europe route (which contributes 30% of global container volume), reducing the frequency of calls that shipping lines could make at WPRTS’s ports as well all other ports in the region.
The WTO cited an emerging trend of connecting economies or countries that benefited from the trade diversion on US-China trade tensions. Malaysia, Singapore, India and Vietnam’s growth are surging due to their emerging role as “connecting” economies, trading across geopolitical blocs, thereby potentially mitigating the risk of trade fragmentation.
Kenanga also acknowledged that stricter regulations on carbon emissions may pose new challenges to global trade, particularly, one from the United Nations’ International Maritime Organization (IMO) and another from the European Union (EU). 

While the exact implications of the regulations of the IMO and EU’s Carbon Border Adjustment Mechanism (CBAM) on the seaport and logistics sectors remain unclear, the volume of containers heading to the EU will certainly be affected. 
This is especially so for those originating from China, which is a major exporter of iron, steel and aluminium to the EU.
On the other hand, the domestic logistics sector still fared better as Malaysia’s total trade moderated to 3.8% as of Aug 2025 versus full-year 2024 growth of 9.2%, especially in the domestically driven third-party logistics (3PL) sector, which is less vulnerable to external headwinds, being buoyed by booming e-commerce.
Industry experts project the local e-commerce gross merchandise volume to grow at a compounded annual growth rate of 7% from 2023 to 2027, reaching RM1.9t by 2027 from RM1.4t in 2023. 
Local players such as SWIFT, however, are faced with intense competition from Chinese players which constrain local players’ ability to fully leverage on Malaysia’s strong total trade growth. 

This situation arises due to the irrational pricing set by Chinese logistics players despite the rising logistics operating costs and Chinese logistics players typically coming in as a package from the new entrant of China foreign direct investment. 
The booming e-commerce will spur demand for distribution hubs and warehouses to enable: 
(i) just-in-time (JIT) delivery.
(ii) reshoring/nearshoring to bring manufacturers closer to end-customers. (iii) efficient automation system, including interconnectivity with the customer system. 
(iv) warehouse decentralisation to reduce transportation costs and de-risk the supply chain. 
There is also strong demand for cold-storage warehouses on the back of the proliferation of online grocery start-ups. All in all, Kenanga maintains NEUTRAL on the sector. — Focus Malaysia

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