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Business Times
20 hours ago
- Business
- Business Times
As end of tariff pause looms, Malaysia could ‘gain greater prominence' in trade: Maybank
[SINGAPORE] Malaysia may be poised to shine in the next phase of global trade, said analysts from Maybank Investment Banking Group. This is in light of a likely fresh wave of US-led tariffs under 'Trade War 2.0'. The overall pause on reciprocal tariffs set by US President Donald Trump will be lifted on Jul 9, with the leader broadly suggesting that he will not extend its deadline. Malaysia could become more competitive as a trading partner, said regional co-head of Maybank's macro research team, Chua Hak-Bin, on Tuesday (Jul 1). 'Outcome of the negotiations between US and key trading partners – including Malaysia – on US reciprocal tariffs as the end of the 90 days suspension approaches will be key to watch,' he added. The country's weighted average tariff rate stands at 12.6 per cent with the pause – lower than that of other regional counterparts, such as Indonesia's 16.9 per cent, the report indicated. On Wednesday, Trump announced that a new trade deal with Vietnam was reached. Exports from the South-east Asian country to the US would be tariffed at 20 per cent, while US exports to the latter would face no tariffs. Goods that were deemed to be transhipped via Vietnam to the US would also face a 40 per cent tariff. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Maybank analysts on Thursday said that the deal appears to be rather 'one-sided', compared to the other deals with the UK and China. They also noted it has not been officially confirmed by Vietnam. 'Vietnam may see some rewards for its efforts to get its tariffs reduced substantially, but the possibility of a full reduction to zero tariff or even a 10 per cent tariff could be slim,' the analysts said. 'This is why Vietnamese dong may continue to remain on the backfoot,' they added. Malaysia versus Vietnam Due to companies increasing their imports and boosting stockpiles before the next round of tariffs come into effect – also known as 'frontloading' – exports to South-east Asian countries are increasing exponentially as firms capitalise on the 90-day pause period, said Maybank. For example, Asean electronics exports grew 31.4 per cent year on year in April, accelerating from 17.8 per cent in Q1 2025. Chua said: 'In the first trade war earlier this year, the biggest beneficiaries of shifts in supply chains were Vietnam and Malaysia.' He observed that the frontloading boost is particularly strong in Vietnam, in addition to countries such as Malaysia, Thailand and Indonesia. In June, the country's benchmark VN Index touched a three-year high, buoyed by expectations that the final tariff rate after ongoing negotiations with the US will be significantly lower than the current headline rate of 46 per cent. Vietnam's visitor arrivals also continued to spike in Q1, around 130 per cent above 2019 levels, and above 140 per cent in Q2 this year, significantly faster than its peers in the South-east Asian region. 'But for the next round, in light of its potential wider gap in reciprocal tariff rates compared to Vietnam, Malaysia may catch up and gain greater prominence,' he said. The macro research analyst said that Malaysia will also likely remain at the lower band after the US unveils the finalised reciprocal tariffs, along with Singapore, whose current tariff rate is set at 5.1 per cent. In the event reciprocal tariffs remain, with key exemptions in the areas of pharmaceuticals, semiconductors and relevant equipment, and various metals and minerals, Malaysia's weighted average tariff rate is expected to rise to 17 per cent. Other countries in such a scenario could face up to 53.3 per cent in these tariffs such as Cambodia, while Indonesia may take on a tariff rate of 34 per cent, according to Maybank's estimates. Significant rebound potential amid weak market performance However, Malaysia's market performance has not been strong. As at Jun 19, it recorded a year to date decline of 8.6 per cent in US dollar terms – the second widest loss in Asia after Thailand. The FTSE Bursa Malaysia KLCI has also only been able to recover to pre-Apr 2 levels and is still in negative territory year to date. This is primarily due to macro overhang posed by pending semiconductor and electronics sector-wide tariffs which could severely disadvantage these key export industries, said Anand Pathmakanthan, head of regional equity research at Maybank. For context, Malaysia exports over US$10 billion of semiconductors to the US or around 3.3 per cent of its total exports. But Pathmakanthan is 'overweight' on the laggard Malaysian market, and is confident that it has 'the biggest rebound potential', with clarity around sector-specific tariffs in the areas of semiconductors and electronics. 'Investors can now refocus on robust domestic macro momentum per broad investment upcycle, resilient consumer spending (amid a forecasted rate cut in the third quarter of 2025 to provide further support), and maturing policy initiatives such as fiscal reforms and the up-and-coming Johor-Singapore Special Economic Zone,' he said. Lim Sue Lin, head of research of Malaysia at Maybank, said that the Malaysian government continues to be in negotiation with the US on these reciprocal tariffs while this report was written. 'A further risk that could arise from here is the extended Middle Eastern tensions,' she said. 'Softer macro and any market weakness in the second half of 2025 would offer investors an opportunity to accumulate stocks, especially the banks, which we believe stand out as long-term winners,' she added.
The Independent
05-03-2025
- Business
- The Independent
Main takeaways from China's parliamentary session kick-off
China on Wednesday kicked off its annual parliamentary session, the National People's Congress, which outlines the government's priorities for the year. Stabilizing the sluggish economy and pushing for broader applications of artificial intelligence were among the focus areas in a work report read by the country's premier, Li Qiang. Beijing also vowed to address a property market slump and ballooning government debt that are dragging on economic growth as well as find ways to boost employment and offer better public education, health care and social security support. Here are the main takeaways from the annual government work report of the world's second-largest economy: China is aiming for economic growth of 'around 5%' (despite its trade frictions with the US) China set an economic growth target of 'around 5%' for 2025, in line with the past two years. Last year, the economy grew by 5%, according to official data, aided by strong exports and stimulus measures. However, the International Monetary Fund estimates that China's economy will slow this year, to about 4.6% growth. One of the main threats to the country's economic growth is a looming trade war with the United States. Beijing and Washington have been slapping tit-for-tat tariffs on each other's goods over the past few weeks. The duties threaten to shave up to 1.1 percentage points off of China's economic growth this year, according to Maybank Investment Banking Group. Li spoke of 'an increasingly complex and severe external environment,' with rising 'tariff barriers' and geopolitical tensions. Raising consumption is the government's main priority The main priority outlined in Li's report was addressing 'inadequate domestic demand, particularly insufficient consumption,' as well as making 'domestic demand the main engine and anchor of economic growth.' China is struggling to get its people to spend more money amid a protracted property market slump. People's reluctance to spend has led to a deflationary spell, which threatens to push the country into even deeper economic trouble. Among the measures meant to help boost consumption, the government has announced raising the fiscal deficit ratio to 4%, from 3% last year, and issuing ultra-long special treasury bonds totaling 300 billion yuan ($41.3 billion) to finance consumer goods trade-in programs, some of which are already underway. AI and technological self-reliance take center stage Achieving technological self-reliance is one of Chinese President Xi Jinping's key aims. Over the past few years, the U.S. has moved to limit China's access to advanced technologies including semiconductors over security concerns, so Beijing would like to be able to develop critical advanced technologies at home. Li promised the government will support research and development in 'core technology in key fields.' In particular, the country is interested in expanding the development and use of AI in smart manufacturing, new-energy vehicles and robotics. Beijing promises to address the property slump and local government debt Another one of China's economic woes is its property slump, set off after the government began cracking down on excess borrowing by real estate developers, pushing many property companies into default. Li promised Beijing will 'make continued efforts to stem the downturn and restore stability in the real estate market,' including by lifting property transaction restrictions and leveraging real estate financing to ensure the timely delivery of housing projects. The premier also said the central government will address mounting local government debt and especially target the 'hidden debts of local governments.' The rise in the defense budget and Beijing's stance on Taiwan remain consistent China also announced a 7.2% rise in its defense budget this year — the same percentage as last year. A National People's Congress spokesperson on Tuesday had described the country's defense spending as measured and hovering under 1.5% of GDP. Beijing commands the largest armed forces in the world and the second-highest military budget after that of the U.S., as it seeks to assert its territorial claims and challenge U.S. alliances in Asia. On the issue of Taiwan, the self-ruled democracy China claims as its own, the government work report reiterated Beijing's ambitions to 'resolve the Taiwan question,' meaning to annex the island. The report added that Beijing opposes separatist activities aimed at Taiwan's independence and external interference in relations across the Taiwan Strait.
