POTENTIAL UPSIDE SEEN FOR MALAYSIA’S EXTERNAL TRADE IN 2026 ON E&E BOOST - MBSB IB

KUALA LUMPUR, Feb 20 (Bernama) -- Potential upside from the front-loading of electrical and electronics (E&E) shipments ahead of phased United States tariffs on a broader range of semiconductor products could support Malaysia’s external trade in 2026, according to MBSB Investment Bank Bhd (MBSB IB).

Malaysia’s exports are projected to grow at 4.5 per cent, down from 6.5 per cent last year, and imports are projected to increase by 5.0 per cent, compared to 6.2 per cent, reflecting a normalisation from last year’s stronger growth pace, said MBSB IB in a research note today.

The investment bank stated that the country’s export performance would also be supported by the sustained global tech upcycle and resilient US demand, provided that an additional tariff hike is deferred beyond 2026.

“Meanwhile, the Agreement on Reciprocal Trade (ART) with the US is expected to enhance market access, and ongoing export diversification efforts should help cushion external headwinds and geopolitical risks.

“On another note, moderate demand for the commodity sectors could limit the production and trade of resource-based products, and the oversupply condition will likely result in easing global commodity prices,” said MBSB IB.

Malaysia’s total trade continued to expand by 12.6 per cent year-on-year in January 2026 to RM272.37 billion, marking five straight months of double-digit growth with exports surging by 19.6 per cent year-on-year to RM146.87 billion, while imports edged up by 5.3 per cent to RM125.50 billion.

Meanwhile, RHB Investment Bank Bhd (RHB IB) stated that Malaysia’s export performance in 2026 would be driven by three key trends: robust global and regional growth, developments in US tariff policies, and the continued strength of E&E exports.

It added that accelerating global economic growth and robust ASEAN expansion should support Malaysia’s key exports, particularly E&E, machinery, and commodities, while the conclusion of the ART, together with existing exemptions, has materially improved Malaysia’s trade outlook, with about 64 per cent of exports to the US now excluded from reciprocal tariffs.

“This has eased tariff risks and strengthened trade and manufacturing momentum. Our positive outlook for 2026 is reinforced by robust trade data, and we expect this momentum to continue, with export growth projected at 9.3 per cent,” it added.

RHB IB acknowledged potential downside risks from major trade partners, including a possible slowdown in demand from the European Union (EU) and China, which could impact external demand.

The investment bank said additional risks include shifts in the US trade policy, evolving regional trade dynamics, and the potential introduction of sector-specific levies, particularly on semiconductors

Kenanga Investment Bank Bhd (Kenanga IB) said uncertainty remained around the US tariffs and the impact of Donald Trump-era policies on global supply chains, although risks appear less severe than initially feared.

It added that commodity-related exports remain vulnerable to geopolitical tensions, supply disruptions, and uneven global demand, while China’s uneven recovery also poses downside risk.

“On the flipside, earlier global monetary easing, ongoing fiscal support, and the strengthening global tech cycle could cushion the downside,” it added.

-- BERNAMA