KUALA LUMPUR, Sept 18 (Bernama) —\u00a0Hong Leong Investment Bank (HLIB) Bhd believes that Malaysia\u2019s neutral geopolitical stance places it in a strong position to manage potential external policy shifts that may arise in the United States (US) after its Nov 5 elections.<\/p>\n\n\n\n
The US presidential election will see a contest between Kamala Harris and Donald Trump for the top office.<\/p>\n\n\n\n
In a research note today, HLIB noted that a Trump victory would likely bring greater economic fluidity and market volatility, given his confrontational and \u201cshoot from the hip\u201d approach.<\/p>\n\n\n\n
\u201cThis is not necessarily a bad thing\u201d the report said, \u201cInvestment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz has suggested that a second Trump presidency could benefit Malaysia through trade and foreign direct investment diversions if Trump escalates the trade war with China.\u201d<\/p>\n\n\n\n
Conversely, a Harris win would likely signal continuity with the policies of her predecessor, offering more predictable conditions, the bank added.<\/p>\n\n\n\n
In the near term, HLIB reiterated its expectation that the US Federal Reserve (Fed) will implement three consecutive -25 basis point rate cuts at the remaining Federal Open Market Committee meetings this year, in response to moderating inflation and a cooling labour market.<\/p>\n\n\n\n
\u201cThis will narrow the Fed Funds Rate-Overnight Policy Rate (FFR-OPR) spread, which augur well for the ringgit.<\/p>\n\n\n\n
\u201cWe maintain our end-2024 US dollar-ringgit target at 4.30 (average: 4.60), with potential for further appreciation,\u201d it said.<\/p>\n\n\n\n
Regarding Bursa Malaysia, the narrowing FFR-OPR spread is expected to boost the benchmark index, given the negative correlation of approximately 50 per cent between the two, HLIB noted, while maintaining its end-2024 FTSE Bursa Malaysia KLCI (FBM KLCI) target at 1,720.<\/p>\n\n\n\n
However, the bank warned that external volatility could rise as the US presidential election nears.<\/p>\n\n\n\n
Additionally, HLIB highlighted that a stronger ringgit has historically supported the FBM KLCI, which tends to perform better when the local currency appreciates.<\/p>\n\n\n\n
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