Latest news with #Innes
New Straits Times
4 days ago
- Business
- New Straits Times
Analyst: Malaysia leans on quiet engagement to seek favourable tariffs revision
KUALA LUMPUR: Malaysia remains locked in quiet engagement and possibly embracing a deliberate positioning with the United States (US) to lower the 25 per cent tariffs on its exports to the American markets as the Aug 1 deadline approaches. Unlike other Asean countries, which have struck quick deals with Washington, SPI Asset Management managing partner Stephen Innes said Malaysia's more measured response to the impending US tariffs likely reflects deliberate positioning rather than passivity. He said that contrary to countries pursuing headline-grabbing diplomacy, Malaysia often leans on quiet engagement and multilateral cooperation to navigate complex trade tensions. With the Aug 1 deadline nearing, exporters and investors are keeping a close watch on the outcome of these negotiations, which would reshape the cost dynamics of doing business between Malaysia and its third-largest trading partner. While regional peers such as Indonesia and Vietnam have already struck last-minute deals to reduce their tariffs to 19 per cent and 20 per cent, respectively, Malaysia is still seeking favourable terms that safeguard local industries without compromising national interests. The proposed tariffs — a revival of protectionist measures introduced during President Donald Trump's first term — have stirred fresh uncertainties across Southeast Asia, where economies are deeply embedded in global supply chains. Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz has described the ongoing talks with the US as progressing well, with emphasis on striking a balanced outcome. "This low-profile approach fits with Malaysia's broader strategy, namely maintaining economic openness, avoiding entanglement in great power rivalries, and preserving regional alignment within Asean. "By staying restrained, Malaysia may be aiming to protect its long-term credibility as a stable, rules-based partner," said Innes. That said, he cautioned that the exposure is real as Malaysia's export economy is heavily tilted toward electrical and electronic goods, precision machinery, and intermediate components, many of which plug directly into US-bound supply chains. A 25 per cent tariff could disrupt flows, especially in semiconductors, sensors, and specialised modules that are difficult to reroute, he said. "The pain would be felt most in hubs like Penang, where small and medium enterprises and multinationals are deeply intertwined. "While some firms could shift volumes elsewhere, the high-tech nature of these exports makes substitution harder than it sounds," said Innes. The absence of a bilateral Free Trade Agreement (FTA) with the US limits Malaysia's negotiating toolkit, but Innes believed it doesn't shut the door entirely. He pointed out that Malaysia remained strategically important to US firms seeking reliable, non-China supply bases, which provides leverage particularly if Malaysia targets exemptions for specific sectors tied to US industrial or security interests, such as chip packaging or electric vehicle components. While countries like Indonesia have dangled major purchases to secure tariff relief, Malaysia's options are different, Innes said. "It is unlikely to buy its way into a deal with big-ticket orders. Instead, it can offer alignment, which is co-investment opportunities in green tech, digital infrastructure, or rare-earth refining," he said. According to Innes, these would support Malaysia's industrial roadmap while offering Washington something it values: supply chain resilience and diversification, but from a policy standpoint, the trade-off is nuanced. He noted that offering short-term concessions or budget support might help shield critical sectors from long-term dislocation. "But any deal must be carefully structured. It should channel benefits beyond just large exporters towards local suppliers, workers, and tech development ecosystems," said Innes, highlighting that if no deal is reached, the impact may not be catastrophic at a national level, but could be meaningful in key sectors. "Export growth could slow, investment plans may be paused, and employment could tighten in affected industries. The greater risk is longer-term: losing ground in a global supply chain reshuffle that increasingly rewards agility and alignment. Malaysia still has room to move, but the window is closing," he added. Meanwhile, Moody's Analytics economist Denise Cheok said Malaysia's economic exposure to the US through value-added trade is more significant than headline export figures suggest. Citing calculations based on OECD Trade in Value Added (TiVA) data, Cheok said that Malaysian domestic value added embedded in foreign final demand to the US accounted for slightly over 5.0 per cent of the country's gross domestic product. She noted that this includes not only direct exports of final goods but also intermediate components that eventually reach the American consumers and provide a more comprehensive measure than gross exports alone. "This compares to over 9.0 per cent of GDP for Singapore, which is highly trade-exposed, and about 2.0 per cent of GDP for Indonesia, which is more domestically focused and not as reliant on exports to the US," Cheok said. If the full 25 per cent tariff is imposed without any rerouting of supply chains, Cheok estimates the impact could shave up to 2.6 per cent off Malaysia's GDP in 2025, with the effects likely to be uneven across sectors. "The key manufacturing sector is likely to be hit hard — not only by the direct impact of the tariffs but also by global supply chain disruptions caused by the uncertainty surrounding tariff policies," she said. Cheok added that Malaysia, like many of its Southeast Asian peers, relies heavily on exports as part of its growth model, and structural changes to this would be difficult, even in the long term. "The fractured relationship between the US and its trading partners will likely continue beyond the next three years, and Malaysia should continue strengthening its trade relations with other economies, including Asean, as a counterbalance to this," she said. — BERNAMA
New Straits Times
4 days ago
- Business
- New Straits Times
Foreign funds tiptoe back as ringgit recovers
KUALA LUMPUR: The ringgit's recent rebound is drawing fresh attention from regional fund managers, with early signs of tactical inflows suggesting a modest return of confidence in Malaysian markets. After touching its strongest level this year at 4.1930 on July 1, the ringgit has since eased 0.73 per cent. Still, it gained 0.52 per cent against the US dollar last week, pointing to a steadier footing. Year-to-date, the local note has strengthened six per cent, ranking as the third-best performing Asean currency after the Singapore dollar and Brunei dollar. The improving sentiment comes as investors begin to reassess Malaysia's position amid a softer US dollar and shifting global dynamics. SPI Asset Management said, while the recent gains are encouraging, sustained interest will depend on broader economic and policy signals. "The firmer currency is encouraging some foreign investors to rebalance toward Asia, buoyed by trade optimism and a softer US dollar," he told Business Times. However, he cautioned that this should not yet be mistaken for deep, long-term investor conviction. "Foreigners are dipping their toes, not diving in. Structural buy-in will require more than currency strength. "It needs clarity on fiscal reforms, stronger foreign direct investment (FDI) pipelines and a tech export narrative that's competitive with peers like Vietnam and Indonesia," he added. While the ringgit's rebound has sparked market attention, Innes also caution against reading it as a sign of renewed structural confidence in Malaysia's economy. He explained that the current rally is largely fuelled by external factors, including improved trade sentiment, a steadier Chinese yuan and growing expectations of US rate cuts. Innes added that structural confidence will only return when investors see a long-term economic narrative beyond commodities and consumption. "That means the execution of meaningful reforms, improved governance signals and investment that boosts productivity. Until then, this is more of a relief rally than a true renaissance," he said. STRONGER RINGGIT EASES POLICY, INFLATION Innes said the firmer ringgit gives Bank Negara greater flexibility in its monetary policy approach, while also offering some relief on the inflation front, especially for urban consumers. He said it reduces imported inflation pressures, which means the central bank can hold a steady, data-dependent line without hiking to defend the currency. "That's useful at a time when the domestic economy is still healing and subsidy realignment is politically delicate. "If the US Federal Reserve starts cutting rate by year-end—as many expect—Bank Negara could even ease modestly without undermining ringgit stability, especially if trade flows remain healthy," he added. On the consumer side, Innes said the stronger ringgit may help cap inflation in discretionary categories such as electronics, fashion and luxury goods. As Malaysia is a net exporter of food and energy, it is somewhat insulated from global commodity price swings, but exchange rate strength still matters in shaping everyday consumer prices and easing the overall cost burden on households. "Urban households will feel that in lower pass-through costs, helping to cap core inflation in discretionary categories. "It won't eliminate cost-push pressures tied to subsidy reform or wages, but it does offer a cushion and some breathing room for policymakers managing the transition," he said. According to Department of Statistics Malaysia, the inflation rate rises at slower rate of 1.1 per cent in June, the lowest in four years since February 2021. Despite recent gains, the ringgit remains vulnerable to several external risks that could reverse its momentum. Innes said a resurgence in US inflation could force the Federal Reserve to delay or even reverse its expected rate cuts, triggering a renewed dollar rally and putting pressure on emerging market currencies like the ringgit. He added that a slowdown in China or political friction around the South China Sea would also dent sentiment.
Business Times
7 days ago
- Business
- Business Times
STI falls on Friday, in tandem with most regional indices; STI down 0.3%
[SINGAPORE] The Straits Times Index (STI) closed lower on Friday (Jul 25), mirroring most regional indices. The STI fell 0.3 per cent or 11.99 points to 4,261.06. Across the broader market, advancers outnumbered decliners 335 to 245 after 2.2 billion shares worth S$1.8 billion changed hands. The trio of local banks closed lower on Friday, with DBS down 0.3 per cent or S$0.15 at S$49.06. UOB dropped 0.6 per cent or S$0.21 to S$37.15 and OCBC ended 0.5 per cent or S$0.09 lower at S$17.18. City Developments was the top gainer on the STI, closing up 2.9 per cent or S$0.18 at S$6.38. The biggest loser was Sembcorp Industries closing down 1.5 per cent or S$0.12 at S$7.72. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Across the region, major indices were mostly down, with only the Kospi up 0.2 per cent and the Nikkei 225 down 0.9 cent. Hong Kong's Hang Seng Index closed down 1.1 per cent and the KLCI down 0.4 per cent. The markets are turning cautious as the US and China enter trade talks next week in Stockholm, Sweden, said Stephen Innes, managing partner at SPI Asset Management Officials will try to stitch a deal together before the Aug 12 expiry, and there are some tricky issues to navigate namely Chinese industrial overcapacity and relief on export controls and access to more AI components. The 15 per cent tariff pact between Japan and the US is aiding the White House narrative that tariffs are levers and not a lid, he added. 'The fact that Beijing just suspended its antitrust probe into DuPont's China unit may be more than a token – it may be a breadcrumb along the path to détente,' said Innes.
Barnama
25-07-2025
- Business
- Barnama
Ringgit On Firmer Footing Against US Dollar In Early Trade
WORLD By Siti Radziah Hamzah KUALA LUMPUR, July 25 (Bernama) -- The ringgit opened on a slightly firmer footing against the US dollar this morning, shrugging off the broader G10 currencies' weakness as a confluence of domestic optimism and regional tailwinds lifted sentiment, said an analyst. At 8.07 am, the local note rose to 4.2120/2225 against the greenback from Thursday's close of 4.2135/2210 SPI Asset Management managing partner Stephen Innes said while better-than-expected United States (US) data and rising Treasury yields have weighed on most major currencies, the ringgit is drawing strength from positive developments closer to home. 'There is growing confidence that Malaysia could soon secure a trade deal with the US, potentially modelled off the 15 per cent tariff truce the US struck with Japan. 'That alone has markets pricing in a more favourable export outlook, particularly for Malaysia's high-value sectors,' Innes told Bernama. On Thursday, Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz said Malaysia is still on track to secure a trade deal with the US by the Aug 1 deadline at the lowest possible tariff. Innes said investor sentiment was also buoyed by anticipation surrounding next week's high-level talks in Stockholm, between the US Secretary of Treasury Scott Bessent and senior Chinese officials. He noted that the markets see this as a potential catalyst for de-escalation in broader US-China tensions, which historically boosts risk appetite across Asia, including for the ringgit.
The Star
25-07-2025
- Business
- The Star
Ringgit on firmer footing against US$ in early trade
KUALA LUMPUR: The ringgit opened on a slightly firmer footing against the US dollar this morning, shrugging off the broader G10 currencies' weakness as a confluence of domestic optimism and regional tailwinds lifted sentiment, said an analyst. At 8.07 am, the local note rose to 4.2120/2225 against the greenback from Thursday's close of 4.2135/2210 SPI Asset Management managing partner Stephen Innes said while better-than-expected United States (US) data and rising Treasury yields have weighed on most major currencies, the ringgit is drawing strength from positive developments closer to home. "There is growing confidence that Malaysia could soon secure a trade deal with the US, potentially modelled off the 15 per cent tariff truce the US struck with Japan. "That alone has markets pricing in a more favourable export outlook, particularly for Malaysia's high-value sectors,' Innes told Bernama. On Thursday, Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz said Malaysia is still on track to secure a trade deal with the US by the Aug 1 deadline at the lowest possible tariff. Innes said investor sentiment was also buoyed by anticipation surrounding next week's high-level talks in Stockholm, between the US Secretary of Treasury Scott Bessent and senior Chinese officials. He noted that the markets see this as a potential catalyst for de-escalation in broader US-China tensions, which historically boosts risk appetite across Asia, including for the ringgit. "The multiplier effect from Malaysia's recent fiscal stimulus, most notably the RM100 cash handout and fuel subsidy plan, is adding a layer of domestic support. "These measures are expected to cycle quickly through the economy, bolstering consumption and investor confidence in the near term. "Altogether, these factors are helping the ringgit defy the gravitational pull of a stronger US dollar and rally into the session with solid momentum,' said Innes. Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid expects the ringgit to trade within the RM4.21-RM4.23 range against the US dollar today, as he anticipates profit-taking activities in light of strong gains this week. At the opening, the ringgit was higher against a basket of major currencies. It advanced against the Japanese yen to 2.8606/8680 from 2.8751/8804 at the close on Thursday, appreciated against the British pound at 5.6883/7025 from 5.7080/7182 yesterday and rose against the euro to 4.9491/9614 from 4.9517/9605 previously. The local note was also mostly higher against regional peers. It rose vis-à-vis the Singapore dollar to 3.2958/3045 from 3.2995/3057 on Thursday and inched up against the Indonesian rupiah to 258.4/259.2 from 258.5/259.1 yesterday. The ringgit also strengthened against the Thai baht to 13.0459/0857 from 13.0570/0863 on Thursday and was flat against the Philippine peso, remaining at 7.43/7.45 since yesterday. - Bernama
