KUALA LUMPUR, July 26 — The ongoing trade tensions between the US and China will not have much impact on Malaysia’s trade and foreign direct investment (FDI).

UBS Investment Bank Professional Economist Alice Fulwood said the rising trade tensions and the likely imposition of further tariffs would only leave short-term growth impact on the country’s economy.

She said Malaysia would remain a favourite investment destination in Asean due to its position and strong economic foundation.

"In the long term, Malaysia’s nimble economy stands as one of the economies that are relatively better positioned to benefit from market share gains,” she said in a conference call with reporters here today on the impact of US-China trade war.

Looking at exports, Fulwood said Malaysia is one of the best-positioned exporters, especially in the electrical and electronics (E&E) sector, gaining large market share in the event that tariffs could make Chinese exports less competitive.

"Malaysia’s ability to trade at China’s expense is due to the largely similar export products such as electronics, when compared to China. This will position the nation to be a potentially strong substitute exporter to the US,” she said.

China and the US are two of Malaysia’s largest trading partners with shipments of E&E goods accounting a third of Malaysia’s total exports.

Total trade with China grew 20.6 per cent year-on-year (y-o-y) to RM290.65 billion last year, while trade with the US rose 16.3 per cent y-o-y to RM22.12 billion.

Meanwhile, Fulwood also said that based on USB’s Evidence Lab data, it suggested some deterioration in the number of US companies intending to invest in China last year.

"This might imply increasing willingness to invest elsewhere, especially in Asean which is becoming more popular.

"For Chinese companies, Asean is a popular alternative investment destination and we expect to see more Chinese FDI into Asean, given the threat of US tariffs and encouragement on the part of China’s Belt Road Initiative,” she said.

On currency impact, Fulwood said that year to date, the ringgit has maintained a positive stand against the US dollar in Asia, despite declining at 2.4 per cent.

"The risk off sentiment that has accompanied rising trade tensions may keep some downward pressure on the currency.

"We forecast the ringgit to be at RM4.10 against the US dollar by end of the year and at RM4.2 by end of 2019,” she added. — Bernama