Asean will be the clear beneficiary with winners in Malaysia, Vietnam, Indonesia and Thailand, assuming trade tensions continue to isolate the United States (US) and China, said RHB Investment Bank Bhd (RHB IB).
The investment bank said the key conviction in this scenario is for the US Fed Funds Rate to see a two to three-times cut by around 50 to 75 basis points reduction in 2025, thus depressing the global interest rate environment for the year ahead.
“The greenback may stay elevated in the first quarter of 2025 due to risk aversion. However, the narrowing of the US dollar’s positive carry should weaken its strength, leading the US Dollar Index to move towards 103 by year-end,” it said.
In the inflation space, RHB IB accounts for moderate supply chain congestions isolated within US shores.
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“However, we are also assuming (a strong uncertainty) that Asean will see no material US-led trade sanctions despite China’s purported efforts to divert its manufacturing and investment activities into Asean,” it said.
RHB IB also assumes that the US will implement tariffs against China and selected trading partners, with China likely retaliating with its tit-for-tat tariff proposals; and the US import tariff rates increase will be gradual, and will rise to at most 30% for China, owing to further fears of intensified retaliation.
Regarding geopolitical tensions, RHB IB assumes ceasefires across key conflicts, specifically in the Russia-Ukraine and
Israel-Palestine tensions.
“Meanwhile, a war of mere words could be felt on the US-related geopolitical noise, with Trump seeing little legal and operative grounds to take over Greenland, Panama Canal and Canada,” it said.
Source: Bernama
