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KUALA LUMPUR (Nov 8): Donald Trump's recent US election win will affect Malaysian exporters, but is largely neutral for domestic growth, the ringgit, and the equity market, said CGS International.
"Hence, we see recent market consolidation as an excellent buying opportunity, and we maintain that the market has overlooked the positive macro growth undertones and continued reform agenda that was clear from the recently announced Budget 2025," the research house said in a note on Friday.
CGS said the most significant impact could be on manufactured goods exporters, such as those in the technology and glove sectors.
"Having said that, we believe the impact on the latter could be manageable (even if a 20% tariff is introduced), given that tariffs on Chinese glove imports are expected to increase to 50% in January 2025, and 100% in January 2026."
The house added that Malaysian glove producers could still compete due to lower wages and operating costs compared to the US.
"A loss in market share for Malaysian glove manufacturers would essentially come if US manufacturers are able to be competitive enough with a 20% tariff protection."
However, the tech sector might face greater challenges, as US automation and innovation could exploit the 20% tariff benefits.
Commodity exports are unlikely to see major tariffs, though increased US fossil fuel production could pressure oil prices.
Conversely, higher tariffs on Chinese imports might boost China+1 investments in Malaysia, with Western multinationals expected to continue long-term investments.
The US dollar's trajectory is another key factor. While Trump's policies could inflate the economy and affect the trade deficit, leading to a rise in US yields, the current federal funds rate might not be sustainable.
"We maintain that the federal funds rate should trend a lot lower (towards 3%) over the next 12 to 15 months, bringing down the whole yield curve, albeit potentially with some steepening at the long end. Despite the initial knee-jerk reaction, we think the US dollar index should ease over the medium term (if US manufacturing is to be competitive), providing room for further ringgit appreciation," CGS added.