Bursa Malaysia surges on Wall Street gains amid tariff concerns

[MALAYSIA] Bursa Malaysia has shown resilience, with the stock market rising on March 25, 2025, propelled by a positive performance on Wall Street. The benchmark FBM KLCI saw a modest increase of 6.25 points, bringing the index to 1,510.07. Despite these encouraging movements, concerns over tariff uncertainties, especially regarding the U.S. trade policy, continue to linger, putting a lid on the potential for stronger market rallies.

Wall Street's Positive Impact on Bursa Malaysia

The global markets have been significantly influenced by Wall Street’s strong performance, and this momentum has extended to the Malaysian stock market. U.S. equities surged in the past sessions, reflecting the resilience of the American economy. As a result, Bursa Malaysia benefited from the spillover effects, with investors showing optimism in response to the U.S. market's stability. However, while Wall Street’s performance provided a lift, analysts suggest that the market’s potential upside may be limited unless there is an influx of foreign funds into Malaysia.

Rakuten Trade observed that the market’s overall outlook remained stable, but foreign fund inflows were notably absent. "The market outlook remains boring as the daily volume is still stuck around the three billion shares level," the firm stated. This suggests that despite the favorable external market conditions, domestic investors seem to be in a wait-and-see mode. The lack of fresh capital entering the market restricts the possibility of significant upward movement, even as external factors appear to favor a more positive sentiment.

The Role of U.S. Tariff Concerns in Shaping Market Sentiment

While Bursa Malaysia’s rise can be attributed to the performance of global markets, especially Wall Street, one major concern continues to cast a shadow over the market’s outlook: the lingering threat of tariffs. The trade policies of the United States, particularly those introduced by former President Donald Trump, have left an indelible mark on global trade dynamics. Despite the change in leadership, there is an ongoing uncertainty surrounding the future of U.S. tariffs, especially those affecting key trading partners like China and Malaysia.

Analysts have pointed out that the imposition of tariffs or the continuation of existing trade restrictions could pose serious challenges to Malaysian companies, particularly those that rely on international trade. This uncertainty is one of the primary reasons why investors are hesitant to make larger commitments in the market. The possibility of tariff escalation could disrupt global supply chains, leading to price increases and diminishing profit margins for businesses that depend on imports or exports.

Rakuten Trade emphasized that while Wall Street's performance provided some temporary relief for investors, "the inherent concern over more Trump’s tariffs going forward" remains a significant factor influencing investor behavior. This ongoing concern limits the potential for significant market rallies, as the economic environment remains uncertain and difficult to predict.

Bursa Malaysia's Response to Global and Domestic Economic Factors

Despite the headwinds, certain sectors on Bursa Malaysia have seen positive developments. Notably, the banking sector has shown some resilience, with key stocks like CIMB, Maybank, and RHB reporting modest gains. These gains reflect confidence in the banking sector, which is often seen as a bellwether for the broader economy. However, even in the case of these blue-chip stocks, gains have been modest, indicating that investors are cautious about taking large positions in the market.

Furthermore, stocks in the consumer sector, such as Nestle, have seen recovery. Nestle, in particular, gained 38 sen, bringing its share price to RM68.88. The consumer sector, while generally considered more stable, is not immune to the broader macroeconomic factors influencing market sentiment, including the ongoing trade and tariff concerns.

Despite these pockets of strength, the overall trading volume on Bursa Malaysia remained relatively subdued. The daily volume hovered around three billion shares, which is considered low for a market that would typically benefit from strong external factors like the positive performance of U.S. stocks. The reluctance of investors to engage more deeply with the market reflects a cautious outlook that is directly influenced by global trade uncertainties, especially U.S. tariff policies.

The Technical Outlook for Bursa Malaysia

From a technical analysis perspective, the immediate resistance levels for Bursa Malaysia remain critical in determining the potential for further upside. According to TA Securities, the market’s short-term outlook will likely encounter resistance at the 1,550-point level, followed by stronger resistance at 1,580 points. "The immediate index resistance is retained at 1,550, followed by 1,580, with tougher upside hurdles at 1,605," the firm said.

On the downside, the key support levels are seen at 1,500, with additional retracement supports at 1,472 and 1,450. These levels indicate the market’s vulnerability to downside pressure, should the external trade concerns worsen or if global market sentiment shifts negatively. Investors are closely monitoring these levels, as they will determine whether the market can continue its current trajectory or if it will face a correction.

Tariff Concerns: A Persistent Risk to Malaysia’s Economic Growth

The specter of U.S. tariffs is not just a short-term issue but a long-term risk for Malaysia’s economic growth. As a trading nation, Malaysia is highly exposed to fluctuations in global trade policies. The re-imposition of tariffs or the introduction of new trade restrictions could disrupt Malaysia’s export-driven economy, particularly in sectors like electronics, palm oil, and petroleum. These industries represent some of Malaysia's largest exports, and any adverse trade policies could have significant repercussions for the broader economy.

In addition to tariffs, there are concerns about the broader global economic slowdown, which could impact Malaysia’s growth prospects. The trade war between the U.S. and China, for example, has already had a ripple effect across Asia, with many countries feeling the effects of reduced demand and supply chain disruptions. Malaysia, being part of this regional ecosystem, is not immune to these pressures. While domestic economic growth remains positive, external challenges like tariff wars, global recessions, and trade barriers could present significant risks.

The Outlook for Bursa Malaysia: A Balanced Perspective

Looking forward, the outlook for Bursa Malaysia remains balanced, with a combination of positive external factors and persistent domestic challenges. The strong performance of Wall Street and the global economic recovery are factors that could continue to support the Malaysian market. However, without a significant return of foreign funds and with the persistent concerns over trade tariffs, it is unlikely that the market will see a major upward breakthrough in the short term.

For now, investors will need to navigate the complexities of the global economic landscape while keeping a close eye on the potential for policy changes in the U.S. and other major economies. The resolution of tariff concerns, or at least greater clarity on the future of U.S. trade policy, could go a long way in boosting investor confidence and bringing more capital back into the market.

Bursa Malaysia has managed to stay resilient amid the broader global market rally, bolstered by the positive performance of U.S. equities. However, ongoing concerns over tariffs and trade policies continue to pose significant risks to the market’s growth. Investors will need to stay alert to these developments as they shape the future direction of Malaysia’s stock market and broader economic health. As Rakuten Trade aptly noted, "the market outlook remains boring as the daily volume is still stuck around the three billion shares level," indicating that caution remains the dominant sentiment for many investors.

With volatility expected to continue, investors should be prepared for fluctuations and pay close attention to global economic trends and policy developments in the coming months. As the situation unfolds, Bursa Malaysia's performance will largely depend on external factors such as trade relations, foreign fund inflows, and the resolution of tariff concerns. Until these issues are addressed, the market may remain range-bound, with occasional upward or downward movements driven by global sentiment.