KUALA LUMPUR: US President Donald Trump's China trade policies could trigger foreign fund outflows from China and Hong Kong equities markets into the local bourse, according to Rakuten Trade.
Rakuten Trade's head of research, Kenny Yee, and head of equity sales, Vincent Lau in a post-Trump win commentary today said, Asean countries' neutral stance towards the US may attract foreign funds to re-align their portfolios towards this region.
Prior to the election, net foreign outflows from Malaysia were high at RM1.09 billion.
They believe key sectors for foreign funds include banks (Maybank, CIMB, Hong Leong Bank), telecommunications (CelcomDigi, Maxis), utilities (Tenaga, YTL Power), construction, and plantation due to rising crude palm oil prices.
Rakuten Trade Research maintained a 2024 FBM KLCI target of 1,780 points, based on a 16.8 times 2024 price-to-earnings-ratio (PER) and 15.4 per cent earnings growth.
"The Federal Reserve's potential easing rate policy could further boost the local bourse," they said.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB Research) expects more economic fluidity and market volatility under a Trump presidency given his rather confrontational "shoot from the hip" style.
However, it said this may not necessarily be negative, noting that Malaysia did benefit from the ongoing US-China trade war. "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 – US was Malaysia's third largest export destination in 2023 at 11.3 per cent. "For now, we maintain our end-2024 KLCI target at 1,700 based on 15.5 times price-earnings (PE) on CY24 earnings per share (EPS).
"Our investment themes on tourism recovery, energy transition, Johor's developmental reinvigoration and disposable income boosting measures should be fairly insulated the US election outcome – while trade war beneficiaries could see revived interest," it noted.
CIMB Securities Sdn Bhd expects that, post-election, equities will benefit from an immediate flight to stocks, with markets shifting to a risk-on mode as uncertainties related to the US elections dissipate.
The firm said 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 automotive and oil and gas sectors may face challenges.
"Our top picks among sectors expected to gain from Trump's policies include SD Guthrie, Inari, and Hartalega," it said.
Kenanga Research said that while companies benefiting from a stronger US dollar, such as exporters, will be the most obvious near-term plays, the firm is monitoring the potential near-term ripple effects on the Malaysian market.
It said 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 (approximately a six per cent decline in two months), the FBM KLCI dropped by about three per cent.
"Thus, assuming if 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.