Over the years, Malaysia’s trade with US has declined from 16.8 per cent of total trade in 2004 to 8.8 per cent n 2015. However, Malaysia’s trade with China has moved up from 8.1 per cent to 15.8 per cent in the same period.
US imports from Malaysia are mainly electrical machinery, machinery, optical and medical equipment, rubber, palm oil, and cocoa.
Gross FDI inflows from the US have edged up from RM11.5 billion (12.8% of total) in 2008 to RM16.2 billion in 2015 (12.6 per cent), although stock of FDI from US dwindled from RM36 billion in 2008 to RM34 billion as at mid-2016.
Comparatively China’s stock of FDI shot up from RM7 billion in 2008 to RM45 billion as at mid-2016. Noteworthy gross inflows of China FDIs marked a record RM17.5bn (25.8 per cent of total) in first half of this year, marking growth of at least 13 per cent p.a. since 2008.
The latest signing of 14 business arrangements with proposed investments estimated at RM144 billion will further boost China inflows.
The shift underscores importance of ensuring balance in trade and investment ties, and significance of stronger regional integration and ties with China in light of the growing anti-trade rhetoric and sentiment in the West, says UOB economist Julia Goh.
US recorded cumulative net portfolio outflows of RM15.8 billion since 2010 against total cumulative net inflows of RM81.1 billion in the same period. Though the expression of interest in Malaysia’s government bonds remains as it was highlighted in the latest Economic Report 2016/17 that five per cent of 10-year and 24% of 30-year tranches of 2016 Government of Malaysia’s Global Sukuk are held by US investors.
“Given that foreign holdings of Malaysian Government Securities has reached 51.9% of total (or RM184 billion) and overall government bonds at 36% of total (RM214.8 billion) as at October 2016, the risk of capital reversal is high.,” Goh says.
“However, large portion of the non-resident holdings are held by central banks, sovereigns, asset management company, and pensions funds who are deemed to be long-term holders.”
She says the Donald Trump presidency could be negative for US-Asia trade, given his pledges to clamp down on immigration to the US and renegotiate free-trade agreements.
“Asian currencies, especially the Chinese yuan, could face upside pressure if labeled as currency manipulator. Asian central banks could stay ‘lower for longer’ amid higher downside risks to trade and growth in the region,” Goh says.
Source : The Heat Malaysia Online