Tariff concerns weigh on reception of 13MP

The Star

2 days ago

PETALING JAYA: The 13th Malaysia Plan (13MP) announcement by the Prime Minister, which promises RM611bil in allocation for the next five years, did not bring much cheer to the stock market.
Investors stayed on the sidelines as they were more concerned about the final tariff outcome, set to be announced by US president Donald Trump.
Analysts who spoke to StarBiz, on the other hand, are not overly enthusiastic about the 13MP, although they do foresee benefits for households and several business sectors.
It is, therefore, not surprising that the 13MP announcement did little to lift the mood of the already sombre Bursa Malaysia, weighed by foreign fund outflows.
At market close yesterday, the stock exchange saw 545 gainers – outnumbered by 475 declines and 483 counters that remained unchanged.
The benchmark FBM KLCI, on the other hand, fell by 11.25 points or 0.74% to 1,513.25 points on July 31.
Of the 30 component stocks of the FBM KLCI, a total of 18 ended the day in the red.
A similar negative sentiment was observed across key Asian stock market indices.
Singapore's Straits Times Index lost 1.08%, while Hong Kong's Hang Seng declined 1.6%.
China's Shanghai Composite Index fell 1.18% and South Korea's Kospi slipped 0.28%. However, Japan's Nikkei 225 rose 1.02%.
Across the region, investors remained jittery as Trump's tariffs are set to take effect today.
As for the investors in the Malaysian equities space, they may appreciate the 13MP measures more once the tariff dust has settled.
iFAST Capital research analyst Kevin Khaw Khai Sheng saw no major surprises in the 13MP announcement.
'Overall, no surprise is the best surprise for us.
'The 13MP largely reiterates directions already outlined by the government within the Madani Economy framework.'
Khaw viewed the increase in development expenditure as a positive development, signalling the government's sustained focus on infrastructure.
Meanwhile, BIMB Securities director of research Mohd Redza Abdul Rahman said the 13MP looks at the various existing government policies that are currently active, 'as expected'.
'As some of these policies end in 2030, naturally the 13MP will focus on accelerating the deliverables of the outcomes outlined.'
However, Mohd Redza noted several interesting new policies as part of the 13MP, one of them being the National AI Action Plan 2030.
It targets to increase high-value research and the creation and commercialisation of intellectual property through the provision of research facilities and targeted incentives.
'The action plan is a step in the right direction as this action plan brings together the relevant policies to accelerate their implementation, by addressing the overlaps while also angling them into one common direction of execution.'
The second interesting policy, according to Mohd Redza, is the National Trade Blueprint 2.0, which is meant to ensure that trade policy strategies and initiatives can be implemented effectively.
'The challenges and unpredictability of geopolitics, especially the tariff war, needs to be addressed smartly to strengthen our trade relations globally, whilst ensuring the sovereignty of the country is protected,' he added.
Segment-wise, Mohd Redza sees the construction sector as the biggest winner of the 13MP, underpinned by the government's focus on development expenditures between 2026 and 2030.
'Furthermore, the potential hike in water tariffs would also provide another impetus for the sector, as under-investment in water production for years springs opportunities in the near future as the country aims to reduce non-revenue water (from leakages due to old pipes) and ensure that the current sources are sufficient to cater to the needs of population growth as well as the pick-up in industrial activities including data centres.
'The spillover effect will also be felt for the utilities sector.
'The focus on expanding the use of the industrialised building system and emphasis on affordable housing would be a boon to the property sector.'
Meanwhile, the initiatives in support of upliftment of social mobility as well as raising the living standards will be positive for the consumer sector.
This will lift the disposable income and purchasing power supported by broader consumption, but margin pressure may emerge in the near term for labour-intensive operators, according to Mohd Redza.
Echoing a similar stance, iFast's Khaw anticipates domestic-focused industries –including consumer staples, construction and property – to be the primary beneficiaries of the 13MP.
'The technology sector, particularly semiconductor and software companies, holds the highest upside potential, given its current attractive valuations.
'However, we suggest investors approach this as a tactical play, as the broader macroeconomic landscape remains uncertain.'
The next focal point, according to Khaw, is the outcome of the United States-Malaysia tariff negotiation.
iFAST's base case is for the ultimate tariff rate to hold at 19% to 25%.
'In other words, the 25% might already be the ceiling and any lower tariff rate will be a catalyst for us.
'Our end-2025 FBM KLCI target remains at 1,600 points, while the US dollar-ringgit exchange rate will hold at 4.2 to 4.3,' said Khaw.