Bursa plunges as trade tension escalates

The US will raise the tariffs on RM830b worth of Chinese goods this week and hundreds of billions more to be announced soon


THE FTSE Bursa Malaysia KLCI (FBM KLCI) was pressured from the sharp sell-off yesterday following a shocking tariff announcement that could escalate trade tension between the US and China.

US President Donald Trump heightened pressures on China to reach a trade deal after saying the US will raise the tariffs on US$200 billion (RM830 billion) worth of Chinese goods this week and hundreds of billions more to be announced soon.

The announcement has caught the world by surprise, particularly after projecting optimism for both countries to reach a resolution on their trade battle.

At 5pm, the FBM KLCI fell 4.5 points or 0.27% to 1,632.8 levels, a sharp plunge from 1,730.68 on Feb 21.

Over the past 52 weeks, the FBM KLCI declined 11.3% and has trading a price-to-earnings ratio of 20.5 on a trailing basis.

According to Bloomberg data, 17 shares in the FBM KLCI fell while eight counters rose.

On regional markets, the Korea Stock Exchange fell 16.43 or 0.74% to 2,196.32, Japan’s Nikkei 225 dropped

48.85 points or 0.22% to 22,258.73 and Hong Kong’s Hang Seng slide 128.8 points or 3.16% to 3,891.24.

Rakuten Trade Sdn Bhd VP (research) Vincent Lau (picture) said the tracking of global equity has not knocked the local benchmark out of its support level of between 1,620 and 1,600.

“The market will trade within its support level between 1,600 and 1,620, and it has been holding up well compared to the regional markets.

“However, the tariff hike has taken the markets by surprise as the trade talk has been reportedly progressing well,” Lau told The Malaysian Reserve (TMR).

Lau added that the regional markets will continue to follow the development of the trade talk and further actions on China’s retaliatory moves.

“As we are just tracking what is happening in the global market, all eyes will be on China’s response to the trade war,” he said.

Another analyst said the local market, which has slowed down since its highest trading in February, will be further dictated by the weaknesses of the regional markets.

“The local market depends on how the US market will perform. The further weakness in the US market will have a knock-down effect on the global market and the effect will not be restricted to Malaysia,” he told TMR on condition of anonymity.

“Recently, Malaysia has been one of the performing markets anyway. I don’t expect the market will be further adversed unless there is a huge sell-off in the global market,” he added.