Malaysia sees impact from China’s slowdown

KOTA KINABALU: The potential US-China trade war which is expected to cause a trade slowdown has caused stress in global equity markets as investors turn wary of whether any of the billion dollar tariffs proposed by both countries might materialise.

For Malaysia, the research arm of Public Investment Bank Bhd (PublicInvest Research) reckoned that China’s slowdown in trade would be more impactful on Malaysia than the US.

“This is rightly so as China is now Malaysia’s largest trade partner at 16.9 per cent of all trade in 2017.

“The US, in the meantime, is Malaysia’s 4th largest at 8.9 per cent in 2017, behind Singapore and the EU,” explained the research arm.

In an economic update, PublicInvest Research said after using 56 years’ worth of data from 1960-2016, it estimated that for every one per cent drop in China’s trade, Malaysia’s trade would reduce by 0.1 per cent against 0.09 per cent with the US.

As for gross domestic product (GDP), every one per cent drop in China’s GDP would cause a drop in Malaysia’s GDP by 0.018 per cent against 0.012 per cent with the US.

While these figures suggested that Malaysia was fairly resilient against the uncertainties of external markets due to our solid

This is rightly so as China is now Malaysia’s largest trade partner at 16.9 per cent of all trade in 2017.

KUALA LUMPUR: MercedesBenz Services Malaysia Sdn Bhd, the financing arm of MercedesBenz, will continue to provide financing for Mercedes-Benz and Fuso commercial vehicles, despite the German car manufacturer exiting its commercial vehicle distribution business in Malaysia.

Managing director Mike J Ponnaz said commercial vehicles contributed about 15 per cent to Mercedes-Benz Services financing portfolio and the company would continue to provide financing services, as long as it can contribute to the growth of sales of Mercedes-Benz.

“Mercedez-Benz and Fuso are still our brands.We will still be here to support our brand,” he told Bernama at the company’s fifth anniversary domestic demand, PublicInvest Research warned the negative effects US-Trade war might leech over to the equity and bond markets.

“Nonetheless, the backlash from external uncertainties may dampen the domestic equity and bond markets, both of which have sizeable foreign ownerships of circa 16 and 30 per cent respectively, as reflected in the Balance of Payment’s current and financial account.

“As a result of this vulnerability, the Ringgit may experience higher volatility which in turn may shave consumption and investment appetite and hence, GDP growth,” explained the research arm.

That being said, PublicInvest Research was hoping that the US-China Trade war will not materialise as they believes that trade protectionism defies the law of comparative advantage and serves only to reduce the world’s trade.

“As of now, we think China will be defiant, which means this trade spat may last for quite some time. If any, the full measure may only be seen in 2019 given the tabling and re-tabling of proposals. celebration yesterday.

Ponnaz said as of March this year, the company’s financing portfolio stood at RM2.4 billion, exceeding last year’s full year total of RM2.2 billion.

He said the exponential growth was attributable to higher vehicle sales by Mercedes-Benz Malaysia and more customers using the financing platform provided by Mercedes-Benz Services Malaysia.

“We financed four out of ten vehicles sold by MercedesBenz Malaysia,” he added. Last week, Mercedes-Benz Malaysia reached an agreement to sell its commercial vehicle business in Malaysia to Hap Seng Consolidated Bhd for an undisclosed sum. — Bernama

“The impact to equity markets may take place much earlier however, as investors turn wary on who else the US would ‘attack’ next – other deficit countries like the EU, Japan, Mexico, Germany and Canada,” the research arm opined.

Nevertheless, one local sector that could end up benefitting from an all-out US-China trade war is plantations as one of China’s retaliation moves against the US’s proposed US$50 billion tariff on Chinese goods is a 25 per cent duty on a slew of US agriculture produces such as wheat, corn, cotton, tobacco, beef and soy beans.

The tariff on soy beans will be especially beneficial to the local plantation sector as crude palm oil is a viable substitute for soybean oil.

While it is expected that China will first increase their soybean import from Brazil, the volume is not expected to be enough to compensate for the lower volume coming from the US.

“So in the long run we expect lower soybean oil supply in China. Palm oil stands to benefit from this as it is a common substitute for soybean oil for use in the food processing industry,” said MIDF Amanah Investment Bank Bhd (MIDF Research) in a sector update.

Agreeing with this, the research arm of Affin Hwang Investment Bank Bhd (AffinHwang Capital) believed Malaysia and Indonesia’s plantation sectors would benefit most from the tariff as they account for about 84 per cent of global palm oil supply.

“Given that CPO can be a substitute for soybean oil, we believe this could help to boost demand for our palm oil products and help to further lower stock levels which as of February this year, stood at 2.48 million metric tonnes (MT), a 69.8 per cent increase year over year (y-o-y),” said the research arm.

Overall the development is anticipated to be a positive impact on CPO prices in the long run.

PublicInvest Research Mercedes-Benz services to continue financing for Mercedez-Benz, Fuso commercial vehicles

PublicInvest Research said after using 56 years’ worth of data from 1960-2016, it estimated that for every one per cent drop in China’s trade, Malaysia’s trade would reduce by 0.1 per cent against 0.09 per cent with the US.