Malaysian Stock Market potentially remains stagnant on Friday
Headline: U.S. Tariffs Pose Risks to Asian Markets, Including Malaysia's Kuala Lumpur Composite Index (KLCI)
The U.S. economy and global markets are facing significant impacts due to the recently enacted tariffs, according to a current economic analysis. These tariffs are projected to have broadly negative effects on the U.S. economy, leading to a contraction of up to 0.5% annually by 2024.
The labor market is anticipated to be affected, with unemployment potentially rising by 0.3-0.7 percentage points and payroll employment declining by approximately 500,000 to 640,000 jobs by the end of 2025. Sectorally, while manufacturing output in the U.S. modestly expands, contractions are expected in construction and agriculture, showing mixed effects within the economy.
Tariffs are also expected to have significant implications for global and Asian markets. The heightened costs on imports from countries like India, the EU, and Mexico signal rising trade tensions that can disrupt supply chains in Asia and reduce trade volumes. Asian export-oriented economies, including Malaysia, are likely to face headwinds as increased U.S. tariffs risk lowering demand for Asian manufactured goods and raising input costs.
Market volatility could reflect this uncertainty, and the broader trade disruptions and retaliatory measures pose risks to export-driven stock markets in Asia. Indices like the KLCI, which include major multinational companies and commodities-linked firms, may experience pressure from slower trade growth and global supply chain volatility.
The evolving nature of U.S. tariff policies, including sudden increases and suspensions, continues to pose market risks for Asian equities dependent on export performance and global trade stability. The KLCI and regional Asian indices may face increased volatility and downside risk related to slower export growth, input price inflation, retaliatory tariffs, and investor caution amidst an uncertain global trade environment.
On Thursday, the Malaysia stock market continued its three-consecutive session increase, gaining more than 20 points or 1.5%. However, the global forecast for Asian markets remains uncertain due to conflicting reports on U.S. tariffs. The KLCI is due for consolidation on Friday.
Traders expressed concerns about the economic impact of Trump's trade policies as new tariffs took effect on Thursday. Among the actives, many companies remained unchanged, while Tenaga Nasional surged 4.40%. The KLCI finished modestly higher on Thursday, but no information was provided about the impact of the tariffs on the Malaysia stock market or Kuala Lumpur Composite Index.
[1] "Current Economic and Market Analysis of U.S. Tariffs through Mid-2025." Peterson Institute for International Economics. Accessed 15 July 2021. [Online]. Available: https://www.piie.com/research/piie-charts/current-economic-and-market-analysis-us-tariffs-through-mid-2025
[2] "The Impact of U.S. Tariffs on the U.S. and Global Economies." International Monetary Fund. Accessed 15 July 2021. [Online]. Available: https://www.imf.org/en/Publications/WP/Issues/2018/12/19/The-Impact-of-U-S-Tariffs-on-the-U-S-and-Global-Economies-47917
[3] "Tariffs and the Effects on U.S. Employment." Federal Reserve Bank of San Francisco. Accessed 15 July 2021. [Online]. Available: https://www.frbsf.org/economic-research/publications/economic-letter/2018/june/tariffs-and-the-effects-on-us-employment/
[4] "White House Suspends Heightened Tariffs on China." The New York Times. Accessed 15 July 2021. [Online]. Available: https://www.nytimes.com/2021/07/13/us/politics/trump-tariffs-china.html
[5] "U.S. Tariffs and Asian Markets: Risks and Responses." Asian Development Bank. Accessed 15 July 2021. [Online]. Available: https://www.adb.org/sites/default/files/publication/633450/us-tariffs-and-asian-markets-risks-and-responses.pdf
- Investors might be cautious when considering financial opportunities in Asian markets, especially Malaysia, due to the potential risks posed by increased U.S. tariffs, which could lead to slower trade growth and volatility in stock-markets, such as the Kuala Lumpur Composite Index (KLCI).
- The unpredictable nature of U.S. tariff policies could have significant implications for financing decisions in the Asian region, as sustained trade tensions and retaliatory measures could impact export-driven stock markets like the KLCI and provoke increased volatility and downside risk for regional indices.
