Icon8888 Gossips About Stocks
(Icon) Potential Trade War Windfall For Malaysian Furniture Manufacturers
On 6 July 2018, Trump slapped 25% tariff on USD34 bil China products. In retaliation, China imposed equivalent amount of tariff on US products. Trump instructed his Trade Office to escalate by slapping 10% tariff on another USD200 bil China products. This time, furniture is on the list.
https://ustr.gov/sites/default/files/301/2018-0026%20China%20FRN%207-10-2018_0.pdf
It seemed that the market has not fully grasped the impact of the latest development.
In 2015, the US imported USD12.2 bil of furniture from China. Based on USD : RM exchange rate of 4 : 1, that is equivalent to RM50 billion.
In the event that the tariff goes into effect by end August 2018 (post hearing), American retailers which have been buying from China will have to find alternative suppliers for RM50 bil purchases.
For your information, Poh Huat, Lii Hen, Latitude and Homeritz's revenue last year was RM612 mil, RM716 mil, RM785 mil and RM170 mil respectively. Added together, total revenue is RM2.3 bil. This represents merely 5% of the potential demand to be unleashed by the latest round of trade action. You can imagine the positive impact if the tariff really materialises.
If you ask me which counter is the best play for the above theme, I would say all furniture companies are equally good. Those that are already supplying to US customers will see increase in demand while those that currently don't sell much can tap the opportunity to enter the market in a big way.
Just a word of caution : the tariff is not a sure thing yet. Many things might happen between now and end August. Trade / invest with caution, don't get carried away.
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Discussions
5 people like this. Showing 25 of 25 comments
http://klse.i3investor.com/blogs/icon8888/162902.jsp
trade war will make their products more competitive against those make in China.
and;
today furniture counters go up alot too @@
2018-07-20 16:40
According to UOB Kay Hian analyst, the wood based panel makers, eg. Evergreen and Hevea etc, will also be the beneficiaries as 10% trade tariff will also be imposed on wood based panel exported from China to US, if the tariff really come into effect in end Aug'18.
I suppose that explains why LiiHen, Pohuat,Evergreen & Hevea stock prices all shot up today. TheStar just published UOB Kay Hian's analysis today.
2018-07-20 23:00
The strengthening of USD and the potential 10% tariff on China imports would provide Malaysia wood based manufacturers a big boost for their stock price to run from now till Aug, I think.
2018-07-20 23:03
Just that, Furniture need to deal with the cost hike of raw materials eg. Rubber wood and Coating & Chemical products .
Production curve line / scale & Technology know how manufacturing that may be the only way to mitigate it .
2018-07-20 23:16
be caution, rmb had depreciated 8% since march, overall price increase is 2%. significant??
2018-07-21 10:44
Monday many may rush in... Hope would not be trapped in the end after profit taking... hihihi
2018-07-21 10:49
http://www.klsescreener.com/v2/news/view/407071
Early Birds get the worms..
2018-07-21 10:57
no trap now la....furniture stocks already hit rock bottom for quite a while..now is the time to up!
2018-07-21 10:57
Icon8888 is very expect in USD ....I still remember that time during POH HUAT he recommended at RM1+ .....if not mistaken 3 year ago.....
2018-07-21 11:05
Most furniture co r at bottom prices...worths a look...i m in hevea n liihen
2018-07-21 12:01
Chinese government is very good. They have a lot of ammunition. They have already devalued their currency from 6.3 to 6.8 for 1 USD. Deprecated more than the RM.
Trade war may lead to stagflation. Consumers may hold back spending on durable goods. It may not be all that rosy when it pan out. When China goes down, don't think others can prosper.. hihi
2018-07-21 12:12
Furniture is labour intensive and the impending implementation of the min wages in Malaysia, how does it affect the competitiveness unless the company has factories in Vietnam or other 3rd world countries...
2018-07-21 12:24
Risk assets and oil prices would likely tumble as worries about growth arise, hitting currencies of commodity-exporting countries particularly hard -- namely, the Russian ruble, Colombian peso and Malaysian ringgit -- before taking down the rest of Asia.
“Asian central banks will initially try to stem currency weakness through intervention,” Brooks said. “But then Asian central banks will step back, and in my mind, the big underperformer on a six-month horizon could be EM Asia.”
https://www.bloomberg.com/news/articles/2018-07-20/currency-war-erupts-as-trump-blasts-china-eu-for-manipulating
2018-07-22 09:10
When trade War escalates, everything will tumble together... Stagflation, depression like that of the 1930s? Scary... Seems history could repeat itself..
2018-07-22 17:53
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4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Fabien Extraordinaire
with or without trade war, outlook for furniture industry is promising given the strength of US economy and the hurricanes. this trade war is a bonus.
2018-07-20 16:31