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THE recent agreement between the United States and China to temporarily scale back tariffs is broadly positive for the Malaysian equity market, according to CIMB Securities Sdn Bhd, which cited reduced recession risks and higher net foreign inflows as key drivers.
"We are maintaining our KLCI target of 1,657 points, with a review planned following the first quarter of 2025 (1Q 2025) earnings season," the brokerage said in a note.
"We continue to prefer domestic-oriented companies with stable dividend yields, particularly in the banking, telecommunications, utilities, construction and healthcare sectors to provide shelter from tariff-related headwinds," it added.
CIMB Securities said Malaysian banks stand to benefit most from the development, given their liquidity and status as proxies for the domestic economy. Public Bank, RHB Bank and Alliance Bank Malaysia (ABMB) remain its top picks in the banking space.
The plantation sector may also gain from improved global edible oil demand and stronger crude oil prices if the economic outlook brightens, with IOI Corporation cited as the firm’s preferred stock in the segment.
The easing of trade tensions is also expected to bolster global semiconductor demand, the brokerage said, noting that Malaysian technology firms maintain a competitive advantage due to relatively lower US tariffs compared to those imposed on Chinese goods. Inari Amertron and MPI Tech were highlighted as top technology picks.
In the glove manufacturing sector, Malaysian producers are anticipated to retain a cost advantage, as tariffs on Malaysian imports to the US remain at 10 per cent, significantly lower than the 30 per cent levied on Chinese gloves. Kossan and Supermax are favoured in this category.
"We are removing SD Guthrie from our top picks list, following a recent rating downgrade. Our updated top picks are CelcomDigi, Gamuda, Public Bank, Farm Fresh, RHB Bank, Tenaga Nasional, IHH Healthcare and 99 SpeedMart," it said.
The US and China have reportedly agreed to reduce tariffs on each other’s goods over the next 90 days, in a move seen as a temporary de-escalation of their protracted trade dispute. Negotiated in Geneva over the past weekend, the accord will see the US reduce additional tariffs on Chinese goods to 30 per cent from 145 per cent, while China will lower its tariffs on US imports to 10 per cent from 125 per cent.
In addition, China has announced it will cancel or suspend certain non-tariff measures previously placed on US products. - May 13, 2025