PETALING JAYA: Bursa Malaysia’s FBM KLCI, along with other regional markets, slumped to its biggest single-day drop since March 2008 on fears of an escalating trade war after China announced retaliatory tariffs on the United States products over the weekend.
Analysts and fund managers concurred that investors are adopting a risk-off approach for the time being, but pockets of newsflow from yesterday have revealed that countries such as Taiwan and Vietnam are eyeing zero-tariff deals with the United States.
The local bourse premier index plunged 84.96 points, or 5.6%, to an intraday low of 1,419.18 yesterday, its lowest since October 2023, before recovering to 1,443.80, a 4% decline, at 5pm.
Similarly, other major indices in the region such as Singapore’s Straits Times Index, Hong Kong’s Hang Seng and Japan’s Nikkei 225 also fell by 7.66%, 13.2%, and 7.83% respectively.
While Malaysia has indicated it will continue to engage with the Trump administration for concessions to the recently imposed 24% tariff, the moves by Taiwan and Vietnam appear to be shaping up as signs that just maybe, the renowned deal-maker businessman turned president’s tactics could be evolving in his favour, and the country’s trading partners.
Although continuing to acknowledge that markets have been generally spooked by China’s response to the sweeping tariff step by the United States last week, analyst and head of equity sales at Rakuten Trade Vincent Lau said one positive development is that more than 50 countries have now reached out to Trump for further trade negotiations.
“We were looking for more clarity on April 2 (when the tariffs were announced), but the tariffs dished out were more severe than anticipated and it appears the uncertainty may last a bit longer now that these countries have decided to negotiate, including Malaysia.
“So while the volatility may persist for the moment, we believe a relief is possible once conducive trade deals are finalised between these respective countries and the United States,” he told StarBiz.
Despite recognising that the regional fallout yesterday has been “fairly dire”, Lau nonetheless took note that this could be Trump’s negotiation strategy to bring related parties to the table, which could prove to be a catalyst for a swift rebound when clarity is achieved.
He said: “It may be better to see a quick drop, followed by a quick rebound, rather than having equity markets that are declining gradually without any catalyst in sight.”
Chief executive and fund manager at Areca Capital Danny Wong is also not pessimistic, as he pointed out that many countries have responded to Liberation Day’s tariff, with China hitting back with a 34% tariff on US imports, escalating the commencement of a trade war.
“The fear of slower global growth and the possibility of US stagflation had caused a massive sell-downs.
“However, while the risks are there, we see another opportunity in this once-in-a-blue moon crisis-like selling in the current situation, which is not a sign yet of a recession,” he said.
Furthermore, he said many institutional funds have cash readily available to enter the market.
He added that the overall tariff situation still looks positive to Malaysia as every exporting country to the United States is getting hit by the tariffs, most more intensely.
“As anticipated, the market has reacted negatively, but may pick up after the dust has settled as investors are typically jittery of any news, and their reaction could turn negative very quickly,” said Wong.
In the export sectors, he singled out gloves as one that stands to benefit.
He said the “China + 1” diversion may also mean some counters in the semiconductor sector such as in the electronics manufacturing services, automation and chip testing segments may now win contracts which could have been on hold previously as manufacturers have less incentive to venture into countries with higher tariffs.
Chief investment officer at Tradeview Capital Nixon Wong opined that investors could be spooked by the fear that markets like Japan and the European Union could potentially react in similar fashion to China, hence the pullback in major indices yesterday.
He said the fall in the FBM KLCI yesterday has opened up bottom-fishing opportunities on quality and yielding companies with large capitalisations which are domestic-centric and less impacted by global trades, such as banks, real estate investment trusts and consumer staples.
Echoing the view of Rakuten’s Lau, he said any negotiation between the tariff-hit countries with the United States is welcome as these could provide relief to an already poor general sentiment.
“Without that in the near term, the market volatility is set to remain high as uncertainties remain and funds may not be buying in significantly,” said Nixon.
Meanwhile, head of research at MIDF Amanah Investment Bank Bhd Imran Yusof said the equity sell-off in Asia is possibly both a knee-jerk reaction to China’s retaliatory tariffs with fears that this may escalate further, as well as concerns that the tariffs may lead to a recession in the United States or globally.
“This may be overblown at the moment as there still needs to be a full assessment of the impact of the tariffs,” he told StarBiz, going on to recommend caution for investors to stay on the sidelines, at least until the storm blows over.
Investor Ian Yoong strikes a similarly cautious chord to Imran, as he believes that the performance of Asian markets yesterday is more than a knee-jerk reaction to tariffs imposed by the Trump administration as the tariffs will have long lasting impact on the global economy and profitability of businesses globally, unless they are watered down.
He revealed that he has been keeping cash as 30% of his portfolio since the last quarter of 2024, and has started to slowly accumulate stocks yesterday.
“The tariffs imposed by the Trump administration are substantial and will impact the profitability of companies that export to the United States as these products will be less competitive in that market.
“There will be products such as cars that will be priced out of the United States market and in turn impact business performance.
“This negative sentiment in the equity markets could last six to 18 months,” said Yoong.
Relatedly, a trader remarked that it would be interesting to see what would transpire from any talks between the Madani government and the Trump administration, now that Taiwan and Vietnam have “gone all in” and considered removing all tariffs on US products.
