KUALA LUMPUR: Malaysia is well-placed to handle potential policy changes following the U.S. presidential elections on November 5, owing to its neutral geopolitical position.
Hong Leong Investment Bank Bhd (HLIB Research) suggests that under Donald Trump's leadership, Malaysia may experience increased economic flexibility and market volatility, given his unconventional and confrontational style.
Despite this unpredictability, HLIB highlights that Trump's policies have previously benefited Malaysia, particularly during the U.S.-China trade war.
On the flipside, a win by Kamala Harris will likely see more familiar waters as she continues on with the policies laid by her predecessor.
In the oil sector, Trump's push for more oil could be a bane for oil prices with the expected increased supply, while Harris' potentially restrictive oil policies may offer some price support.
"Any swings in oil price could have implications on Malaysia's fiscal position as petroleum formed 18-32 per cent of government revenue post goods and services tax abolishment and Petronas' capex, which has implications for local OGSE players," it said in a note.
Trump is expected to ratchet up the trade war with China if he wins the top position, as he has called for a not more than 60 per cent levy on Chinese goods, alongside a 10-20 per cent blanket rate on all other imports.
Harris' approach could likely mirror Joe Biden's targeted style by focusing on strategic sectors.
"Continuation (or escalation) of the US-China trade war could be beneficial for Malaysia via trade diversion and proliferation of the China+1 strategy."
Meanwhile, Harris will likely continue Biden's pro-climate policies, while a Trump win could mean a regression from this.
HLIB Research said the latter scenario may help keep solar module prices low, offering conducive conditions for Malaysia's energy transition under the National Energy Transition Roadmap and benefiting local solar developers and EPCC contractors.
Both candidates will also end either one of the geopolitical tensions.
While ending the wars involving Russia-Ukraine and Israel-Gaza will be a Herculean task, the research firm added that Trump is likely to have a better chance with the former and Harris with the latter.
"A resolution would ease the geopolitical risk premium on oil price," it said.
In terms of taxes, Harris intends to raise the corporate tax rate from 21 per cent to 28 per cent, while Trump wants to preserve existing tax cuts under the Tax Cuts and Jobs Act, and perhaps lower corporate tax to 15 per cent).
"Judging from the past "Trump tax cuts", this would be positive for Wall Street (KLCI is 60 per cent correlated), while the opposite would be likely under Harris' proposal."
The US will hold its presidential elections on November 5,. Based on polling averages, Harris is currently leading at 49 per cent or 1.7 per cent higher, vs. Trump's 47.3 per cent.