Nixon Wong, chief investment officer at Tradeview Capital.
PETALING JAYA: Following the steep sell-down in January which saw the FBM KLCI retracing by more than 4%, analysts are forecasting a rebound from the relief in tariff fears as US president Donald Trump appears to be adopting a more flexible stance.
The mini bounce-back of the index yesterday was in line with most major bourses, after Trump said tariffs on Mexico and Canada would be delayed for a month following the latter two countries’ respective announcements that they would tighten border security.
This comes as the White House also said Trump would speak with Chinese President Xi Jinping within the next couple of days, igniting hopes that a deal could be reached that could avert a broader trade war.
A head of research at a foreign securities firm is anticipating the local equity market to rebound this month as fears emanating from Trump’s policies abate, before remarking that although tariff impositions continue to pose a threat to markets, the local bourse remains a relative safe haven in the region.
Besides the US tariff factor, experts also believe that the results season this month could also be lending further support to the local equity market, with chief investment officer at Tradeview Capital Nixon Wong telling StarBiz that export-oriented companies that were previously impacted by foreign-exchange losses could see some positives, given the renewed weakening of the ringgit in the past two weeks.
“For now, however, we believe that the FBM KLCI is likely to remain on consolidation mode or range-bound in the coming months, until further clarity emerges on the full details and implementation of trade policies as Trump approaches his first 100 days in office.
“Meanwhile, the consumer sector could benefit from festive and year-end demand, with this momentum potentially extending throughout the first quarter of 2025,” he said.
That said, Wong thinks Trump’s focus will still be US-centric since that appears to be the latter’s mandate given to him by the American public at the November presidential election.
The investment expert is of the view that the new US president’s rationale would be to narrow the bilateral trade gap between the United States and China, which remains significant.
“In light of slowing economic growth in China, the country may consider taking a step back and making some concessions to Trump to create room for a breather. However, these concessions are unlikely to be extensive,” said Wong.
At the same time, head of equity sales at Rakuten Trade Vincent Lau said the market is expecting for both Trump and Xi to “have a good chat” within the next couple of days, after the White House announced the heads of the world’s two largest economies will converse in the hope to avoid a broader trade war.
This comes after the US president’s statement on Monday to ramp up tariffs on China, after imposing a 10% duty on all the latter’s goods on Saturday that are set to take effect this week.
The United States has mentioned China is the primary source of the precursor chemicals synthesised into fentanyl by drug cartels in Mexico, although China said it had taken significant strides to crack down on the chemicals and touted measures to cut down on the illicit drug trade.
Lau said a productive conversation between Trump and Xi would ease trade tensions and improve business conduciveness, adding that the benefits could flow into sectors such as the electronics and chip industry. “It is also noteworthy that besides reiterating his suggestion for the creation of a US sovereign wealth fund, Trump has mooted the idea that the wealth fund may also acquire Chinese app TikTok,” he said.
Echoing the thoughts of Tradeview Capital’s Wong, Lau said China could be eager to “strike a deal” with Trump, although he believes this may not deter the effects of the China + 1 policy.
He said: “The United States would still be keeping a close eye on China, nevertheless, so businesses will keep on looking out for alternative investment venues. Asean and Malaysia are going to continue benefiting from China + 1.”
In addition, he said Malaysia’s neutral political stance will mean the country remains relatively insulated from any possible escalation of a “trade war”, emphasising that February should see more clarity with regard to Trump’s external trade policies.
Lau also observed that sentiment in the FBM KLCI should improve as the country has seen an outward flow of foreign funds in tandem with other regional bourses in the past 15 weeks, leading to more bargain-hunting activities among investors, particularly with the upcoming corporate results season.
“So, let us just wait for the recovery which may occur this month,” he said.
Notably, Malacca Securities said that the imposition of an additional 10% tariff, on top of the existing 50%, on China’s rubber medical and surgical glove exports to the United States is expected to boost sentiment towards local glove counters.
“Besides, given the recent pullback in the construction sector, we believe the significant discount in share prices might present bargain-hunting opportunities for the construction counters, supported by the Johor-Singapore Special Economic Zone initiatives and the ongoing data centre developments in the country,” said the research house in a note.
The FBM KLCI closed 10.93 points, or 0.7% higher yesterday to settle at 1,564.56 points, with gainers trouncing losers 448 to 356, while 611 counters closed unchanged.
Among the top gainers were consumer stocks Heineken Malaysia Bhd
and Fraser & Neave Holdings Bhd, which saw respective gains of 34 sen and 30 sen, while CIMB Group Holdings Bhd, Sunway Construction Group Bhd and MBM Resources Bhd were also among other notable gainers.
