US-China Tariff Development Positive For Malaysian Equity Market - CIMB Securities 

By Karina Imran

KUALA LUMPUR, May 13 (Bernama) -- The United States (US)-China agreement to temporarily reduce tariff is broadly positive for the local equity market, as it reduces the risk of a US and global recession and leads to higher net foreign inflows, said CIMB Securities Sdn Bhd. 

"We are maintaining our KLCI target of 1,657 points, with a review planned following the first quarter of 2025 (1Q 2025) earnings season. 

"We continue to prefer domestic-oriented companies with stable dividend yields, particularly in the banking, telecommunications, utilities, construction and healthcare sectors to provide shelter from tariff-related headwinds," it said in a note. 

The securities house said Malaysian banks could benefit from the development, given their liquidity and role as direct proxies for the domestic economy. Public Bank, RHB Bank and Alliance Bank Malaysia (ABMB) are its top picks for the banking sector. 

The plantation sector may also benefit from stronger global edible oil demand and higher crude oil prices if the economy improves, with IOI Corporation as its top pick.

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CIMB Securities said easing trade tensions could support global semiconductor demand as Malaysian technology players continue to retain a competitive edge, because the temporary fall in US tariffs on Chinese goods remains higher than those imposed on Malaysian goods.

Additionally, it believes Malaysian glove manufacturers will continue to enjoy a cost advantage, as the US tariff on Malaysian imports remains at 10 per cent compared with the 30 per cent imposed on Chinese imports. 

CIMB Securities has chosen Inari Amertron and MPI Tech for the technology sector; top picks among glove makers are Kossan and Supermax.

"We are removing SD Guthrie from our top picks list, following a recent rating downgrade. Our updated top picks are CelcomDigi, Gamuda, Public Bank, Farm Fresh, RHB Bank, Tenaga Nasional, IHH Healthcare and 99 SpeedMart," it said.

It was reported that the US and China have agreed to lower tariffs on each other’s products for the next 90 days, signalling a de-escalation in the ongoing trade war between the world’s two largest economies.

Under the agreement negotiated in Geneva over the past weekend, the US will reduce additional tariffs on Chinese goods to 30 per cent from 145 per cent, while China will cut tariffs on US imports to 10 per cent from 125 per cent. 

China also announced that it will cancel or suspend certain non-tariff measures previously imposed on the US.

MIDF Amanah Investment Bank Bhd (MIDF Research) expects further negotiations to be announced or a partial reduction of the tariff rate at best. 

"We must bear in mind that this is only a three-month temporary reduction; the 10 per cent baseline tariff still exists globally. There is still a fair amount of uncertainty about where these tariffs will finally settle and their impact on world growth and central bank policy. 

"The three-month window is a short one, but a positive start, nonetheless," it said, adding that the agreement is positive news for both economies and the global economy. It is maintaining a base case view of a +4.0 per cent gross domestic product growth for Malaysia this year.

MIDF Research said Malaysia stands to benefit from positive spillover effects in external trade as a highly open economy.

It said robust trade and production activities in the US and China over the next 90 days would support Malaysia’s export and manufacturing outlook through early August 2025. 

"This is expected to provide a positive boost to Malaysia’s growth in the second quarter of 2025 (2Q 2025). In addition, Malaysia’s ongoing negotiations with the US also aim to secure a mutually beneficial trade deal. 

"Overall, we view all trade discussions as encouraging developments that may help to mitigate higher tariff risk on Malaysia’s growth outlook and supply chain stability," said MIDF Research. 

-- BERNAMA