Trade War: Impact on Bursa Malaysia Stock Market

We may have heard of World War I, World War II, the Vietnam War, and the Gulf War. But have you ever heard of a trade war?

Trade War Impact on Bursa Malaysia

In today''s modern world, psychological warfare has become the warfare of our era — using policies, trade strategies, foreign exchange rates, and even intelligence technology through mobile applications.

What you need to know about a trade war is that it is an economic conflict between major world powers to protect their respective industries.

America Vs China

For example, the United States attempted to lower the USD foreign exchange rate against China. (Further reading)

Additionally, America imposed tariffs on steel and aluminium against Canada, Mexico, and Europe.

The US also imposed import tariffs on China, where industries manufacturing their goods in China would be subject to these tariffs.

This drives up the price of goods, and as a result of rising prices, consumers tend to reduce their spending.

Some economists have also warned that this trade war could potentially cause effects similar to ''the Great Depression'' of 1929.

Impact on Bursa Malaysia

What are the effects and impact on the Malaysian stock market? Malaysia is among the developing nations that have been affected by the ripple effects of this trade war.

During the selling of the Thai Baht by George Soros in 1997, Malaysia was also affected as it is a neighbour to Thailand.

Due to geographical factors and trade partnerships within ASEAN, almost all ASEAN countries were affected by the Asian economic downturn.

It is therefore undeniable that the Malaysian stock market has also been impacted by this trade war. On 25 June 2018, the Dow Jones index fell by 1.3% to 24,252 and was expected to drop further to the 24,000 level.

The Bursa Malaysia index on 26 June 2018 stood at 1,678.10 points (down 16.05 points, -0.95%) and was expected to decline further to the 1,650 level.

However, not all traded stocks experienced a decline — there were several counters that profited, particularly export-oriented counters.

There are several factors to consider when trading during a high volatile market.

These include Fundamental Analysis, Technical Analysis, and Economic Analysis, all of which are closely related in determining your trading timing and portfolio strategy.

Sources:

https://www.history.com/topics/great-depression

https://www.thebalance.com/the-great-depression-of-1929-3306033

https://www.bloomberg.com/news/articles/2018-06-25/china-and-europe-warn-trade-war-could-trigger-global-recession

FAQ: Trade War and Bursa Malaysia

What is a trade war?
A trade war is an economic conflict between major world powers where countries impose tariffs and trade barriers to protect their domestic industries.

How does the US-China trade war affect Bursa Malaysia?
As a developing nation with strong ASEAN trade ties, Malaysia experiences ripple effects from the US-China trade war, including market volatility and index declines.

What should investors do during high market volatility?
Investors should consider fundamental analysis, technical analysis, and economic analysis together to determine optimal trading timing and portfolio strategy.

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