KUALA LUMPUR: Kenanga Research has upgraded its call for the plastic packaging sector to "overweight" from "neutral" previously on expectation of a stronger flow of orders over the immediate term.

In a note today, the research house said the stronger flow was driven by customers' restocking activities ahead of price hikes stemming from rising resin prices, and overwhelming response to the industry players' sustainable packaging materials.

In addition, it cited KPMG's projection that the global plastic packaging market will grow at a five per cent compound annual growth rate from 2021 to 2026.

"Local producers will grow at a faster rate as they gain market shares from their overseas peers, capitalising on lower energy cost and innovative products such as nano stretch film and mono film that tick the sustainability box," Kenanga Research said.

It said that the upward momentum in local players' sales should sustain into the second half of 2024 on the recovery of manufacturing activities and consumer spending globally.

It also noted that these players are actively seeking out new customers both domestically and internationally by offering the innovative products and actively participating in international trade fairs to establish strategic partnerships and strengthen their market presence.

"Some companies have strategically expanded their capacity in high-margin premium stretch film and blown film products in recent years," it added.

The research house said its sector top picks are Thong Guan Industries Bhd and BP Plastics Holding Bhd.