KUALA LUMPUR (Nov 5): Maybank Investment Bank has warned Asean investors of potential economic turbulence and a surge in trade tensions, amid anticipation of more import tariff hikes if Donald Trump wins a second term as the US president.

Although Maybank IB sees potential “cushioning” from factors like tourism recovery, foreign direct investment, and adjustments to supply chains across the region, the Asean-6 gross domestic product — expected to grow 4.8% in 2024 from 4.0% in 2023 — could be hampered if Trump wins.

As the US election results draw closer, the house in its research titled 'Trumpian Trepidation' on Tuesday said the market sentiment is “akin to that of a teenager on their first date" — playing it cool on the surface but wracked with “stomach-churning anxieties” and “skittishness” on the inside.

Maybank IB foresees rising headwinds in the region, particularly in trade and currency impacts with Trump’s possible return to office, coupled with proposals to extend tax cuts and raise tariffs on imports.

“For one thing, the current strong US economy-sticky inflation dynamics would be reinforced by his proposals to raise tariffs and extend tax cuts, meaning the US dollar could remain relatively strong and reduce the room for Asean central banks to ease and cut rates,” Maybank IB said.

Maybank IB also warned of a potential surge in trade tensions, noting that Trump’s tariff hikes could significantly disrupt Asean economies as he threatened to raise import tariffs on China to 60% and impose a blanket 10% tariff on other nations.

The house believes this approach would be a “big trade and tariff shock” that might not only harm exports but also interrupt Asean’s growing role as a manufacturing hub, while at the same time seeing China’s excess capacity or exports diverted to other markets like Asean, exerting a deflationary shock and squeezing domestic competitors.

“Further, Trump may more aggressively target third countries which are seen as conduits for Chinese goods per recent tariffs imposed on Asean solar panel exports,” the note added.

Defensive play advised

Maybank IB recommended a defensive approach, as it urged to focus on sectors with stable domestic demand and resilient cash flows.

“A more defensive stance would clearly be warranted over the short to medium term, with focus being on entrenched, domestically driven franchises with resilient cash flow or high dividend yields,” the house said.

Solid picks include CIMB Group Holdings Bhd (KL:CIMB) and Public Bank Bhd (KL:PBBANK), insurer Allianz Malaysia Bhd (KL:ALLIANZ), as well as telecommunications provider CelcomDigi Bhd (KL:CDB).

Power and healthcare companies include Tenaga Nasional Bhd (KL:TENAGA), YTL Power International Bhd (KL:YTLPOWR), and KPJ Healthcare Bhd (KL:KPJ).

“Down-trading beneficiaries like mass market retailer Mr DIY Group (M) Bhd (KL:MRDIY) should be resilient,” Maybank IB said, adding that growth stocks focused on domestic demand, like credit rating provider CTOS Digital Bhd (KL:CTOS) and dairy company Farm Fresh Bhd (KL:FFB) are likely to hold up well.