Bursa Malaysia experienced volatility as the US trade war began

[MALAYSIA] The global economic landscape is always in flux, and recent developments have raised concerns for financial markets worldwide. Bursa Malaysia, the stock exchange of Malaysia, is currently experiencing heightened volatility, as a new wave of trade tensions emerges between the United States and its trading partners. The ongoing trade war, which began in early February 2025, has had a significant impact on market sentiment, not only in Malaysia but across many emerging markets.

As the US moves to impose tariffs on key imports and reevaluate its trade agreements with other countries, investors are closely watching the ripple effects. Bursa Malaysia has not been immune to these shifts. The trading index has fluctuated in response to changes in global trade dynamics, causing anxiety among market participants. In this article, we’ll explore how the US trade war is affecting Bursa Malaysia, the potential long-term consequences, and strategies for investors looking to navigate the turbulence.

The New Trade War: A Catalyst for Market Volatility

The commencement of a fresh trade war between the United States and several countries has introduced a sense of uncertainty to the global market. While trade wars are not a new phenomenon, the scope and scale of this latest conflict are particularly concerning. The US has targeted several nations, imposing tariffs on a range of goods, particularly those that are vital to Malaysia’s export economy.

The US's trade actions have led to a significant pullback in investor confidence. Market analysts point out that as the trade dispute heats up, countries like Malaysia that depend heavily on global trade are feeling the pressure. The sudden shift in trade policy has left many businesses uncertain about future growth, particularly in sectors reliant on exports such as palm oil, electronics, and natural gas.

The volatility seen in Bursa Malaysia reflects broader global concerns about how these trade tensions could escalate. While the Malaysian government has been working to mitigate the risks through various economic policies, the timing of these developments has caused short-term disruptions.

How Has Bursa Malaysia Responded to the US Trade War?

Bursa Malaysia has shown signs of stress as it grapples with the unpredictable nature of the trade war. The main stock index, the FBM KLCI, which tracks the performance of the top 30 companies listed on the exchange, has fluctuated significantly since the trade dispute began. These movements are a direct result of external factors, including global supply chain disruptions and the uncertainty surrounding future tariffs.

According to financial analyst Shaharuddin Noor, "Investors are reacting to the broader geopolitical concerns, and as we are seeing, Bursa Malaysia’s performance has been anything but stable. The volatility is a reflection of the lack of clarity around the trade situation, which has made investors nervous.”

This statement underscores the broader market sentiment: when faced with uncertainty, investors tend to pull back or reduce exposure to risky assets. In this context, stocks in Malaysia’s export-oriented sectors have been particularly vulnerable. The palm oil industry, for example, which plays a major role in Malaysia's economy, is at risk as tariffs on palm oil exports to the US could increase costs and reduce demand.

Furthermore, the electronics sector, which is a major contributor to Malaysia's GDP, is also facing challenges. US trade policies have the potential to disrupt the global semiconductor supply chain, leading to delays and increased production costs. This has created a ripple effect, affecting the profits of Malaysian companies involved in the production of electronic components and goods.

Sectors Most Affected by the Trade War

While Bursa Malaysia is experiencing volatility across the board, certain sectors are feeling the effects of the trade war more acutely. Let’s take a closer look at the industries most impacted by the ongoing conflict:

1. Palm Oil Industry

Malaysia is one of the world's largest producers and exporters of palm oil. The US has imposed tariffs on palm oil imports, which has significantly impacted Malaysian producers. As a major export commodity, any reduction in demand from the US market could lead to a slowdown in the industry.

As Shaharuddin Noor pointed out, “The palm oil sector is facing immediate challenges with the US tariffs. If these tariffs remain in place, it could lead to a decline in profit margins for major palm oil producers in Malaysia.”

The Malaysian Palm Oil Council (MPOC) has been working to explore alternative markets, but the US remains one of the largest consumers of palm oil. With competition from other palm oil-producing nations such as Indonesia, Malaysia may face significant challenges in maintaining market share.

2. Electronics and Semiconductor Sector

The semiconductor industry is another critical sector in Malaysia. Many multinational corporations rely on Malaysia for the assembly and manufacturing of microchips and other electronic components. As the US trade war escalates, companies in this sector are increasingly facing production delays, higher costs, and reduced demand for certain products.

A major US-based semiconductor firm, which operates in Malaysia, recently warned that rising tariffs could disrupt its supply chain, leading to a slowdown in production. If trade policies continue to tighten, it could lead to lower exports and an eventual contraction of the Malaysian electronics sector.

3. Natural Gas and Energy

The energy sector, especially natural gas, is another cornerstone of Malaysia's exports. As global energy prices fluctuate in response to geopolitical events, Malaysia's energy companies are finding themselves in a volatile environment. The US's trade war has already caused a ripple effect in the global energy market, as major oil and gas companies adjust their supply chains and trading strategies to account for new tariffs and restrictions.

Though the long-term impacts on Malaysia's energy sector are still unclear, companies in the oil and gas space are facing challenges in terms of market access and the rising costs of doing business internationally.

Long-Term Implications for Bursa Malaysia

The ongoing trade war between the US and its partners has sparked concerns about the long-term stability of global financial markets, including Bursa Malaysia. While the immediate impacts of tariff hikes and trade disruptions are being felt in certain sectors, the longer-term implications are still being evaluated.

The potential for reduced global trade, slower economic growth, and a shift in the balance of power in international trade could result in a more challenging environment for Malaysia’s economy. Malaysia’s heavy reliance on exports makes it especially vulnerable to changes in the global trade landscape. The uncertainty surrounding the trade war could lead to further fluctuations in market performance, as investors react to any developments or announcements from the US or other key players.

Additionally, there is the risk that continued trade tensions could prompt other countries to adopt similar protectionist measures, leading to a global slowdown in trade. This could further exacerbate the challenges faced by Malaysia's export-oriented industries.

What Can Investors Do in the Face of Uncertainty?

For investors, the current market volatility presents both challenges and opportunities. The uncertainty surrounding the trade war can be nerve-wracking, but it also opens the door to strategic investment opportunities. In the short term, cautious investors may want to reduce exposure to sectors most vulnerable to trade disruptions, such as palm oil, electronics, and energy.

Long-term investors might consider diversifying their portfolios to minimize risks associated with the trade war. This could mean investing in sectors that are less exposed to global trade, such as domestic-focused industries or sectors with lower dependencies on the global supply chain.

In the meantime, monitoring updates on the trade war and staying informed on government policies will be crucial for investors looking to navigate the volatility of Bursa Malaysia. As Shaharuddin Noor concluded “For investors looking to protect their portfolios, it’s important to stay agile and respond quickly to shifts in the market. It’s a time to be cautious but also to watch for opportunities in sectors that may emerge from the turmoil stronger than before.”

The US trade war has undoubtedly created a challenging environment for Bursa Malaysia. As global trade tensions escalate, the impact on the Malaysian stock market has been evident in the heightened volatility seen in recent weeks. While it’s impossible to predict how long this period of uncertainty will last, it’s clear that Malaysia’s export-driven economy will continue to face pressure as long as the trade war persists.

Investors must remain vigilant, adapt to the changing landscape, and look for opportunities amidst the turbulence. The ultimate outcome of the trade war remains uncertain, but one thing is clear: Bursa Malaysia will be feeling the effects for some time to come. With the right strategies, however, both short-term and long-term investors can weather this storm and potentially emerge stronger as market conditions stabilize.