Bursa poised for gains on US tariff cut, 13MP rollout

New Straits Times

2 days ago

KUALA LUMPUR: A cut in United States import duties on Malaysian goods and the pragmatic rollout of the 13th Malaysia Plan (13MP) could inject fresh momentum into Bursa Malaysia in the coming months, analysts said.
They expect the tariff reduction from 25 per cent to 19 per cent to ease cost pressures on a large share of Malaysian exports, improving margins and lifting sentiment, especially as the rate undercuts China's 25 per cent and Vietnam's 20 per cent.
UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said the tariffs reduction could ease cost pressures on roughly 40 per cent of Malaysia's US$26 billion worth of exports to the US.
This is particularly in electrical and electronics, rubber-based goods, furniture and machinery, which together account for more than 55 per cent of shipments.
He said these sectors could see margin relief of between 10 per cent and 15 per cent, similar to the equity uplift experienced by the Philippines earlier this year after comparable tariff concessions.
"US exemptions for semiconductors and pharmaceuticals safeguard Malaysia's high-value exports, preserving its position in global manufacturing networks and supporting earnings visibility for listed corporates," Sedek told Business Times.
While US President Donald Trump recently threatened a 100 per cent tariff on semiconductor imports with exemptions for firms investing in US manufacturing, Sedek said the immediate impact on Malaysia is expected to be minimal.
However, he cautioned that the sector may face supply chain recalibration if the tariff is implemented across major manufacturing hubs.
Sedek said 13MP — with an RM611 billion expenditure framework for 2026–2030 — prioritises digitalisation, AI adoption, renewable energy and industrial upgrading.
Major projects include Nvidia's RM10 billion AI facility and large-scale solar initiatives, which Sedek said could attract private investment and spur productivity gains.
"Infrastructure and digitalisation efforts such as the Johor–Singapore Special Economic Zone and the GovTech transformation agenda will also drive structural improvements, echoing efficiency gains seen in Estonia's digitalisation push," he added.
Given these tailwinds, Sedek projects the FTSE Bursa Malaysia (FBM KLCI) to trade between 1,570 and 1,585 in the coming months, keeping it on track for a year-end target of 1,650.
However, he cautioned that global monetary tightening, geopolitical risks and commodity price volatility may temper gains.
"Capital flows and exchange rate stability will remain critical to sustaining momentum. Policy agility and disciplined execution will be essential in translating these short-term catalysts into a durable re-rating of Malaysia's equity market," he added.
Looking ahead, Sedek said the FBM KLCI may face several downside risks such as export sensitivity to global uncertainties.
This includes the possibility of US tariffs cutting electronics and furniture export revenues by up to US$2 billion annually, even as Malaysia retains competitiveness over China.
"Domestically, implementation inefficiencies in 13MP, such as bureaucratic delays, may undermine investor confidence in the RM611 billion investment plan," Sedek said.
Apart from the lower tariff and 13MP rollout, Hong Leong Investment Bank (HLIB) Research said sentiment is also supported by rising odds of a US Federal Reserve rate cut as early as September.
However, August could see guarded trading amid persistent foreign net outflows totalling RM14.21 billion year-to-date — the largest since the RM24.6 billion recorded during the pandemic-hit year of 2020.
HLIB analyst Ng Jun Sheng said other headwinds include possible new US tariffs of up to 250 per cent on pharmaceutical products and up to 100 per cent on chips built outside the US.
Sentiment may also be weighed by expectations of a subdued August earnings season and the index's historical seasonal weakness, with average returns over the past 10, 20 and 30 years at 0.7, 1.2 and 2.2 per cent, respectively.
"On the domestic front, concerns surrounding subsidy rationalisation and a potential Sales and Service Tax expansion could further dampen consumer sentiment and cloud corporate earnings visibility," he said.
The FBM KLCI staged a strong rebound from an eight-week low of 1,488.90 to close at 1,557 last Friday, marking its fourth straight gain and surging 23.6 points from the previous week.
The gains were supported by easing US-Malaysia tariff tensions, a pragmatic 13MP rollout and supportive technical signals.
Despite this, HLIB Research said underlying sentiment remained cautious, with market breadth still weak at 0.83 compared to 0.82 previously. Turnover stood at 2.43 billion shares worth RM2.72 billion.
This came amid persistent foreign outflows for an 11th consecutive session, valued at RM1.13 billion last week, mostly in the financial services, healthcare and utilities sectors.
Local institutions remained net buyers at RM1.03 billion, while local retailers bought RM105.5 million in equities.
Average daily trading volume fell across the board, with foreign investors and local retailers down 6.6 per cent and 6.1 per cent, respectively, while local institutions recorded a 4.8 per cent increase.