Tariff, policy risks set to weigh on market in 2H25

New Straits Times

2 days ago

KUALA LUMPUR: Market sentiment is expected to remain fragile heading into the second half of the year, as investors brace for a combination of external tariff risks and domestic policy shifts that could weigh on earnings and consumption.
In its strategy note, CIMB Securities flagged several looming challenges that may limit upside for equities, despite supportive valuations and ample market liquidity.
Chief among them is the scheduled end of the US 90-day tariff reprieve on July 9, which could see the reinstatement of elevated reciprocal tariffs between the world's two largest economies.
"This adds another layer of trade friction to an already cautious global backdrop," the firm said.
On the local front, investors are anticipating potential adjustments to the RON95 fuel subsidy, a move that could raise transport and logistics costs for businesses, while straining household budgets.
CIMB Securities also cited the possible implementation of a higher sales and service tax and an expected increase in electricity tariffs in the second half of 2025.
"Together, these measures could contribute to inflationary pressures and squeeze corporate margins," it said.
"These headwinds may erode near-term earnings visibility and investor risk appetite, even as Bursa Malaysia trades at an undemanding 12.7 times forward price-to-earnings and offers a 4.2 per cent dividend yield."
While acknowledging that policy reforms are necessary for long-term fiscal consolidation and subsidy rationalisation, it said the timing and communication of such measures would be critical to avoid unsettling investors.
Still, the firm noted that downside risks may be partially cushioned by strong domestic liquidity and a strengthening ringgit.
Additional support could come from long-term structural initiatives such as the National Energy Transition Roadmap, the Johor-Singapore Special Economic Zone, and the New Industrial Master Plan 2030.