Kuala Lumpur: The United States (US)-China agreement to temporarily reduce tariffs is seen as a positive development for Malaysia’s equity market, as it diminishes the risk of a US and global recession and may lead to increased net foreign inflows, said CIMB Securities Sdn Bhd.
According to BERNAMA News Agency, the US and China have agreed to lower tariffs on each other’s products for the next 90 days, suggesting a de-escalation in the ongoing trade tensions between the two largest global economies.
CIMB Securities has maintained its KLCI target at 1,657 points with plans to review this figure after the first quarter of 2025 earnings season. The firm favors domestic-oriented companies with stable dividend yields, particularly in sectors such as banking, telecommunications, utilities, construction, and healthcare, to mitigate tariff-related risks. Malaysian banks like Public Bank, RHB Bank, and Alliance Bank Malaysia (ABMB) are identified as top choices, given their liquidity and role as direct proxies for the domestic economy.
The plantation sector could also see benefits from increased global demand for edible oils and rising crude oil prices if economic conditions improve, with IOI Corporation being the top pick. Additionally, Malaysian technology players could gain from sustained global semiconductor demand, given their competitive edge as US tariffs on Chinese goods remain higher than those on Malaysian goods. Glove manufacturers in Malaysia are expected to maintain a cost advantage, with US tariffs on Malaysian imports at 10 percent compared to 30 percent on Chinese imports.
CIMB Securities has identified Inari Amertron and MPI Tech as top choices in the technology sector, while Kossan and Supermax are preferred among glove manufacturers. The firm has updated its top picks to include CelcomDigi, Gamuda, Public Bank, Farm Fresh, RHB Bank, Tenaga Nasional, IHH Healthcare, and 99 SpeedMart, while removing SD Guthrie following a recent downgrade.
The US has agreed to reduce additional tariffs on Chinese goods to 30 percent from 145 percent, and China will cut tariffs on US imports to 10 percent from 125 percent, as per the agreement negotiated in Geneva. China also plans to cancel or suspend certain non-tariff measures on the US.
MIDF Amanah Investment Bank Bhd (MIDF Research) anticipates additional negotiations or a potential partial reduction in tariff rates. It cautions that the three-month reduction is temporary, with a 10 percent baseline tariff still globally present. Despite the uncertainties surrounding the final tariff outcomes and their broader economic impacts, MIDF Research views the agreement as a positive development for both economies and the global economic landscape.
Malaysia stands to gain from positive spillover effects in external trade, given its open economic structure. Robust trade between the US and China over the next 90 days is expected to bolster Malaysia’s export and manufacturing sectors through early August 2025, providing a boost to Malaysia’s economic growth in the second quarter of 2025. Additionally, ongoing trade negotiations with the US aim to secure mutually beneficial agreements that could mitigate higher tariff risks on Malaysia’s growth and supply chain stability.