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Heightened trade tensions weigh on Bursa, ringgit

27 Aug 2019 / 13:28 H.

PETALING JAYA: The escalation of trade tensions between the US and China bogged down major markets across the region today, with the FBM KLCI tumbling as much as 18.82 points or 1.2% to an intraday low of 1,590.51 points.

However, the key index managed to close above the 1,600-point psychological level at 1,600.53 points, a drop of 8.80 points or 0.55%.

Bursa Malaysia’s scoreboard showed 539 losers against 220 gainers, with 461 counters unchanged.

On the currency front, the ringgit weakened 0.31% to 4.2030 against the US dollar as at 5pm today, the lowest in the past 21 months. China’s yuan depreciated to an 11-year low to 7.1469 against the greenback.

The regional stock markets charted a similar path, with Tokyo’s Nikkei 225 Index slumping 2.17% to 20,261.04 points, while Hong Kong’s Hang Seng Index and South Korea’s Kospi sank 1.91% and 1.64% to 25,680.33 and 1,916.31 points, respectively. The Shanghai Stock Exchange’s composite index skidded 1.17% to 2,863.57.

Last Friday, the Chinese State Council announced tariffs ranging from 5% to 10% on US$75 billion (RM315 billion) worth of US goods in two batches effective Sept 1 and Dec 15.

In addition, the administration will impose a 25% tariff on US cars and a 5% on auto parts and components in December, a tariff that was previously suspended in April.

US President Donald Trump tweeted for American companies to “immediately start looking for an alternative to China” and to raise the existing tariffs on US$250 billion of Chinese imports scheduled to take effect on Oct 1, to 30% from 25% previously.

Meanwhile, the tariffs on US$300 billion of goods which are scheduled to take effect from Sept 1 will be at 15% instead of 10%.

Commenting on the trade war saga, Rakuten Trade head of research Kenny Yee opined that it is a knee-jerk reaction across the regional markets.

With the latest tit-for-tat trade measures, Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew cautioned against optimism arising from trade diversion.

“Although the latest tariff measures against the US by China on agriculture and oil might in theory benefit Malaysia, it all depends if these opportunities could be realised,” he told SunBiz.

While the measures against US soyoil imports should translate into better demand for palm oil, he said, lower soyoil prices have affected palm oil, hence the realised benefit is less.

Speaking of the technology sector, Pong said if China develops its own technology ecosystem, there could be opportunities for Malaysian companies to participate, but may lose out in the current supply chain to the US.

On the whole, he conceded that there hasn’t been much benefit from the trade war as the positive impact has yet to materialise.

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