‘MALAYSIA TO FEEL MODERATE IMPACT’

But Moody’s sees country benefiting as alternative manufacturing platform to China

THE United States-China trade standoff will hit Malaysia in a moderate way as the unresolved tensions could lead to a broader economic war.

Moody’s Analytics chief Asia Pacific economist Steve Cochrane said Chinese goods affected by new US tariffs would reach American seaports in the next 30 days or so and unless the world’s two largest economies came to an agreement by then, Malaysia would likely be affected in a moderate way.

“The most immediate impact is uncertainty among investors, leading them to reduce their investments.

“It will also lead to slower growth in China, the US and other economies.

“One can foresee gross domestic product growth falling by about half a percentage point in China and the US, and a little less than that in Malaysia,” he told the

New Straits Times yesterday. Cochrane said for the longer term, Malaysia could see some benefit if investors were to look at the country as an alternative manufacturing platform to China, adding that this would take some time and there would be competition from other Southeast Asian countries as well.

“If the trade war extends beyond this year and deepens further, the pace of global growth would likely slow and this in turn may reduce demand and prices for globally traded commodities such as oil/petroleum products and palm oil.

“This will compound the direct impact from reduced trade with China,” he said.

On the local front, MIDF Research sees rough seas ahead for the FTSE Bursa Malaysia KLCI (FBM KLCI) this week.

MIDF head of research Mohd Redza Abdul Rahman said international and domestic factors would play a big part in FBM KLCI’s performance.

“The market is with uncertainties arising from the trade spat, which saw the US raising tariffs on US$200 billion worth of Chinese goods to 25 per cent last week.

The FBM KLCI dipped to its three-year low on Friday as a result of investors adjusting their positions due to the worsening trade spat. The index closed in the red, down 9.18 points, to 1,601.09 yesterday.

On another note, Redza said the banking industry was expected to seek weaker earnings after Bank Negara Malaysia’s decision to lower the Overnight Policy Rate to three per cent.

“We expect temporary slide in earnings in the banking industry as banks have to adjust their deposit and loan rates. This might figure in the movement of banking stocks,” said Redza.