Tariff war sends KLCI below 1,600-point psychological level

The FBM KLCI was at 1,599.86 points at 3.47pm today.

PETALING JAYA: The FBM KLCI market barometer dipped below the psychological 1,600-point level today.

The index was at 1,599.86 points at 3.47pm.

Analysts said the decline was due to jitters following US President Donald Trump’s imposition of 25% tariff on Chinese goods on Friday.

The market had begun the day’s trading at 1,610 points.

Phua Lee Kerk, chief strategist at Phillip Mutual Berhad, told FMT the market was reacting to the escalating US-China trade war after Trump imposed the 25% tariff on US$200 billion worth of Chinese goods.

“The market is factoring in the Trump’s tariff increase from 10% to 25%. We believe that there will be further downside as the market digests the impact of the tariff increase,” he said.

Asked about the support level of the market now, Phua said technically, the next support level is at 1,570 points but cautioned that the advent of a global financial crisis had not been imputed by the market.

“It all depends how prolonged is the trade war between the US and China.

“If it continues to worsen, companies would have to bear an additional 15% of their costs and would require further financing.

“Banks would be hesitant to lend, and if they lend, they will be saddled by non-performing loans and that would be the seed to a global financial crisis,” he said.

Redza Rahman, head of research at MIDF, told FMT the market was also concerned with the European Parliament elections happening this month.

“If hardliners are voted in the European Parliament, we would see more regressive trade policies which would be detrimental to an open economy such as Malaysia which heavily relies on trade,” Redza said.

Malaysia’s biggest bank, Maybank, was traded unchanged at RM8.97, CIMB was down 4 sen at RM5.08 while Public Bank was up 2 sen at RM22.28 at 4.04 pm.