KUALA LUMPUR: Donald Trump's second presidency could give a further boost to Malaysia's trade and stock market, despite concerns over global volatility given his confrontational "shoot from the hip" style, analysts said.
Rakuten Trade head of research Kenny Yee and head of equity sales Vincent Lau said net foreign inflows to Bursa Malaysia are expected to increase following Trump's election as the US president again.
They noted that prior to the election, net foreign outflows were high at RM1.09 billion. Key sectors for foreign funds included banks (Malayan Banking Bhd, CIMB Group Holdings Bhd, Hong Leong Bank Bhd), telco (CelcomDigi Bhd, Maxis Bhd), utilities (Tenaga Nasional Bhd, YTL Power INternational Bhd), construction and plantation due to rising crude palm oil prices.
"The election of Trump as the US president is expected to increase global market volatility. On polling day, regional equity markets reacted strongly to his victory. Chinese and Hong Kong markets are likely to react negatively, leading foreign funds to re-divert to Asia and Asean, with Malaysia being a preferred destination.
"Asean countries' neutral stance towards the US may attract foreign funds to re-align their portfolios towards this region," they said.
Rakuten Trade maintained Bursa's benchmark FBM KLCI target of 1,780 for 2024, based on a 16.8 times 2024 price-to-earnings ratio (PER) and 15.4 per cent earnings growth.
MIDF Research expects Malaysia to benefit from the intensification of US-China trade war, based on previous experience.
The firm also believes that current foreign direct investment (FDI) trend might continue and may accelerate with the possibility of "Trade War 2.0".
"In terms of trade, we expect export outlook will remain positive because re-direction of trade flows could encourage greater re-exports through Malaysia. In terms of investment, multinational companies may increase their investment into Malaysia as one of the destinations to relocate their operations, which is as part of the China+1 strategy."
In the longer run, the firm expects the US move to tighten its trade rules will promote greater integration with the Global South, both in terms of trade, investment and financial flows.
Hong Leong Investment Bank Bhd (HLIB) expects more economic fluidity and market volatility under a Trump presidency given "his rather confrontational shoot from the hip style".
However, HLIB said this may not necessarily be negative, noting that Malaysia did benefit from the ongoing US-China trade war.
The US was Malaysia's third largest export destination in 2023 at 11.3 per cent.
"The key risk this time around is if he drags the entire world into it as well with his proposed blanket 10-20 per cent tariff. For now, we maintain our end-2024 FBM KLCI target at 1,700 based on 15.5 times price-earnings (PE) on CY24 earnings per share," HLIB said.
CIMB Securities said post-US election, equities will benefit from an immediate flight to regional stocks, with markets shifting to a risk-on mode as uncertainties related to the election dissipate. This is positive for the FBM KLCI, which had been subject to profit-taking before the US election.
"Donald Trump's victory in the US presidential election is likely to positively impact Malaysia's equity market by reducing uncertainties around the election outcome.
"Our preliminary analysis indicates that the plantation, gloves, technology and transport sectors stand to benefit from Trump's policies, while the auto and oil and gas sectors may face challenges."
CIMB Securities' top picks among sectors expected to gain from Trump's policies include SD Guthrie Bhd, Inari Amertron Bhd and Hartalega Holdings Bhd.
Meanwhile, Kenanga Research said while exporters will particularly benefit from a stronger US dollar, the firm is monitoring the potential near-term ripple effects on the Malaysian market.
This includes a possible downward revision of the FBM KLCI year-end target from 1,760 due to the impact of fund flows.
"During the previous episode in early 2023, when the ringgit weakened over a short span (about a six per cent decline in two months), the FBM KLCI dropped by about three per cent.
"Thus, assuming a Chinese stimulus response comes in sufficiently strong and combined with the currency effect, we foresee more local interest supporting the market in the short term, leading to a three per cent risk to our year-end FBM KLCI target of 1,760 for the end of the year to 1,710.
"This would be an implied PER of 16 times (from 16.5 times), to reflect the effect of flows (rather than fundamentals)," it noted.
CGS International Securities Malaysia does not expect any material tariffs on commodity exports, although Trump's policy on enabling greater US fossil fuel production could put pressure on oil prices.
"On the other hand, higher tariffs on Chinese imports could accelerate China+1 investments into Malaysia."
The firm also does not expect western multinational companies to scale back their multi-year investment plans in Malaysia.
CGS Malaysia said with the US Fed funds rate (FFR) at 5.0 per cent, it is unlikely that Trump would support interest rates at such a relatively high level due to the implications on housing, household affordability, commercial real estate and small businesses.
"Hence, we maintain that the FFR should trend a lot lower (towards three per cent) over the next 12 to 15 months, bringing down the whole yield curve, albeit potentially with some steepening at the long end.
"Despite the initial knee-jerk reaction, we think the US dollar index should ease over the medium term (if US manufacturing is to be competitive), providing room for further ringgit appreciation," it said.