What is the impact?

Involving in RCEP gives the country an advantage of accessing markets beyond their homeland, to other countries in the partnership and opens up more opportunities in regional trade. The tariff removal is also a huge benefits to help industries to have less barrier to expand their products/services into other countries. In other words, there will be more opportunities to grow business in the region. However, that also means competition will become stiffer as other foreign enterprises can come in to offer their products and services too.

What to take note as an investor?

In my humble opinion, I think if you are investing in KLSE/SGX, manufacturing sector is certainly worth taking note. However, I think it's better to avoid textile as Vietnam is really strong in this sector. I personally think that automotive sector, such as those producing automotive parts, will benefit from RCEP with the tariff removal. These companies will have a good time as they ride on the local demand as well as opportunity to export.

Another sector to focus will be the semiconductor supply chain. China is facing supply disruption since the beginning of the trade war with Trump administration, and likely to continue in Biden's tenure. Hence, the semiconductor supply chain stands to benefit from RCEP when China is looking to form their own ecosystem. However, do take note on valuation in each companies as some are fetching very high PER. Although I am a believer in the concept of forward earnings, but I also believe in risk management.

Next on my mind is green technology such as solar energy as more initiatives have been taken to reduce carbon emission.

So far the above are my preferred sectors after learning about RCEP. What other ideas do you have? Welcome to share and discuss.

Written by

Rich Son Poor Son