KUALA LUMPUR: A second Donald Trump presidency could have a negative impact on the currencies of emerging markets, including the ringgit, although the effect has yet to show.
MARC Ratings Bhd chief economist Dr Ray Choy there has been a little bit of correlation between the ringgit and Trump's policy orientations.
However, he noted there has also been a silver lining whereby the local currency has yet to see a serial reaction from Trump's policies, especially in October.
"In terms of the overall intraday trading on the ringgit so far, it appears to be relatively stable. The ringgit has performed quite well year-to-date and Malaysia is positively unique in the sense the overall GDP growth trajectory is slightly higher than pre-pandemic level which is a positive counter trend compared to what we see in other economies and region.
"We see global investment pouring in money to Malaysia denominated assets," he said in a webinar on "MARC360 Reflections: Analyses of Malaysia's Budget 2025 And Post-Budget Debates' here today.
Choy noted that Trump is likely to be a lot more expansionary in terms of his overall fiscal spending which will translate into more spending on infrastructure. Tariff on imports will also be a lot broader under Trump.
"There will potentially be more increased deregulation. That will be good for the domestic private sector in the United States (US) but it will be a little less friendly to the operations of foreign business in the country," he said.
Choy said Malaysia, however, has a chance to capitalise on any president that takes office in the White House.
"It is all about policy alignment and basically maximising the benefit that each country can get from the variations in trade policies," he said.
He said Trump's previous term as the president saw impacts on trade tariffs but it affected China a lot more than it did on Malaysia.
During the period, he said Malaysia's trade with the US saw growth albeit minimal.
"This is evidence that trade diversion has continued to benefit Malaysia. If history repeats itself, we should not see too much of a negative impact in terms of overall orientations of Trump's policy.
"There will be some blanket tariffs but the next thing to note is how they will impose the tariffs and will there be preferential treatment to certain countries.
"Malaysia's electrical and electronics sector still forms a large portion of our exports and will always be seen as an important resource for the global Malaysia supply chain. The tariff is going to have a much greater impact on non-strategic goods for the US," he added.
On the domestic front, Choy said Malaysia is on track to meet its growth projections of five per cent for both 2024 and 2025 supported by an elevated manufacturing purchasing managers index and improved business sentiment.
The overnight policy rate is also expected to maintain at current level.
Choy said Bank Negara Malaysia's Monetary Policy Committee highlighted some of the external risks in its statement yesterday and may need to factor in additional risks as a result of Trump's victory.
"The external risks mentioned have been ongoing but now we have added risk from changes in US policies. These changes have the potential to dampen not just Malaysia's trade but also global trade activities.
"These risks need to be factored in prior to any major changes in Malaysia's interest rate trajectory," said Choy.