This is largely because Trump has vowed to protect the US economy at all costs and Malaysia’s exports will become vulnerable to trade disruption.
This is the view of Nomura’s chief India economist Sonal Varma. Nomura is an Asia-based financial services group.
She said Malaysia’s manufactured exports to the US had increased to 13 per cent of total exports and this made the country’s economy vulnerable to any trade disruption.
“Malaysia is an open economy, so there will be some impact on Malaysia,” Sonal said yesterday, according to a report in The Sun Daily.
In 2015, exports accounted for 90 per cent of the Malaysian economy.
The Sun Daily reported Nomura as saying while the projects under the Economic Transformation Programme would remain intact, the increase in global economic uncertainties would likely be negative for private sector investment.
Malaysia’s domestic demand growth slowed down to 3.6 per cent in the first quarter of 2016 compared with 4 per cent in the fourth quarter of 2015.
Regionally, Sonal said, lower gross domestic product (GDP) growth across Asia could be expected due to declining business confidence if Trump became the new US president.
“When exports slow down, the central banks within the region will need to revive domestic demand through more fiscal stimulus,” the report quoted her as saying.
On the currency front, while a Trump presidential election victory is expected to have negative implications on Northeast Asian currencies, Nomura foreign exchange strategist Teo Wee Choon said Southeast Asian currencies would be less affected.
According to a Bloomberg report Nomura strategists think it’s highly likely Trump would slap tariffs on Asian imports, triggering a currency war.
Nomura, in its “Trumping Asia” report, has recommended a long position on Malaysia’s ringgit and Indonesia’s rupiah. This is due to the robust growth, relatively favourable political and policy developments and bond inflows into the two countries, said the Sun Daily report.
Meanwhile, the report said, Nomura interest rates strategist (Asia ex-Japan) Vivek Rajpal said Malaysian interest rates were well supported given the availability of monetary space.
“Unlike in other countries, Bank Negara Malaysia has cut interest rates only once (in recent years), so there is a potential for more easing,” he said.
Meanwhile, the Bloomberg report quoted Rob Subbaraman, the Nomura report’s lead author as saying: “A Trump presidency would no doubt hurt Asia’s gross domestic product growth and could ultimately drive cost-push inflation, impart smaller trade surpluses and looser macroeconomic policies.”
It said Trump had already pledged to withdraw the US from the Trans-Pacific Partnership — a free-trade agreement covering 12 countries from Peru to Malaysia and that accounts for 40 per cent of the global economy. If TPP is ratified before President Barack Obama leaves office, Trump still has the authority to withdraw the US from the treaty.
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