PETALING JAYA: Investor sentiment has turned cautious as signs of a trade war loom, following an announcement late last week by the United States to impose tariffs on steel and aluminium imports.
This comes after the decision to impose tariffs on solar panels in January.
According to a Bloomberg report, the steel tariff can be expected to be signed formally early in the week.
With two moves against trade this year, many believed that US President Donald Trump might be close to withdrawing from the North American Free Trade Agreement.
Speculation over whether major US trade partners would retaliate weighed on investor sentiment, with Asian markets closing lower.
China, which only accounts for a fraction of US steel imports, has said it would defend its interest if the newest move by Trump hurts it.
It was also reported that the European Union may be considering imposing 25% tariffs on US$3.5bil worth of goods – a third steel, a third industrial goods and a third agricultural.
European markets opened higher with trading at mid-morning still up.
The uncertainty hit the local bourse, with the benchmark FBM KLCI slipping 13.72 points or 0.72% to close at 1,842.62.
Bursa Malaysia turned wobbly as Trump’s steel tariff impacted investor sentiment, with some 2.62 billion shares worth RM2.41bil changing hands.
There were 963 losers to 172 gainers, while 266 counters remained unchanged with 458 untraded.
Among the stocks hardest hit by the tariff was aluminium producer Press Metal Bhd , which fell 50 sen or 9% to RM4.97.
The counter fell 32 sen last Friday. Ann Joo Resources Bhd , a steel producer, was down 12 sen to RM3.32, Southern Steel Bhd was nine sen lower at RM1.97, Hiap Teck Venture Bhd lost three sen to 46.5 sen, Malaysia Steel Works (KL) Bhd dropped seven sen to RM1, CSC Steel Holdings Bhd slipped six sen to RM1.40 and Choo Bee Metal Industries Bhd was 14 sen lower at RM2.36.
The market selloff also extended to non-steel and non-aluminium producers, with oil refiner Heng Yuan Bhd slipping RM1.80 to RM10.38, wiping off RM540mil in market capitalisation.
Another refiner, Petron Malaysia Bhd, fell 80 sen to RM9.72, while Hong Leong Bank Bhd , the country’s fifth-largest bank by assets, was down 80 sen to RM18.70.
According to Malaysian Iron and Steel Industry Federation president Datuk Soh Thian Lai (pic), Trump’s trade actions’ actual potential financial effects on local steel players are limited.
“The impact is not severe because Malaysia only exported 96,000 tonnes to the United States out of 34 million tonnes which it imported (in 2017). Malaysia’s imports from the United States only took up 0.28%, and Malaysia mainly exported flat products to the United States,” he told StarBiz.
“Trump’s action to use Section 232 of the Trade Expansion Act of 1962 in view of national security reasons was totally uncalled for because currently, those high-end steel products for automotive, aeroplane and transportation industries are mostly imported,” Soh added.
He said such severe actions by the country could hamper global trade and feared retaliation from others.
Dealers said local investors were mostly selling on strength and taking some money off the table after the solid gains that had been racked up in steel stocks the last few months.
“Some traders would opt to sell first although the impact on local stocks is not so clear or minimal at the moment. There is fear that there would be a much greater impact should there be an all-out trade war if other countries retaliate,” a dealer said.
Steel stocks fell for a second trading day after losing ground last week when the US tariff was announced.
AmInvestment Bank Research said while Malaysia does not export much steel to the United States, the implications of the tariff were wider, as it may add up to 40 million more tonnes of steel supply to the global market.
“But we have protection measures from the Government so it should be okay (for companies locally). I believe that South Korea and Canada would experience the most impact from Trump’s announcement. But China’s exports to the United States is also not that high,” he said.
“Steel stocks falling is an overreaction to the news and I don’t foresee much of an impact. If demand does not pick up, then we might see steel prices going down but the demand outlook so far remains good,” he added.
Meanwhile, Press Metal said in a statement that the tariff would have minimal impact. “We have been monitoring this development and feel the current direct impact on our business is minimal.
Press Metal exports a very minimal amount of its primary aluminium products to the United States. Including extrusion products, our exposure to the US market is less than 1% of our total revenue,” it said.
The company noted that US consumption of primary aluminium was almost six million tonnes last year compared with the domestic production of close to one million tonnes. Canada, Russia and the Middle East were the top-three exporters to the United States, constituting 80% to 90% of the US imports of primary aluminium.