HSBC and UBS upgrade Malaysian stocks as rhetoric heighten trade tensions

The continuing dispute between the two trade giants U.S. and China has led many global banking giants to upgrade Malaysian stocks.

Until now, foreign investors have had concerns about the market, jittery about the potential impact of trade war tensions.

On Wednesday, Swiss financial giant UBS reported that it had upgraded Malaysia from the previous neutral to “overweight.” A day before, one of Europe’s biggest banks HSBC had announced the upgrading of Southeast Asian country from underweight to “neutral.”

Among the Asian emerging markets, the benchmark Kuala Lumpur Composite Index has dropped by 5 percent. It makes it one of the worst performers in the region. Investors from other countries have shied away from staking in Malaysia. They fear the unpredictability of the new government’s economic policy.

Malaysia has managed to win the confidence of some investors even amidst the seemingly economic impediment as a result of the trade war between the U.S. and China.

On Tuesday, HSBC released a report pointing out the economy was considered stable. The domestic demand was doing well as well as manufacturing growth. Low earnings growth was witnessed but they are hopeful it may not continue. Valuations were quite attractive though not as in other markets.

Furthermore, the market was well prepared to deal with heightened trade tensions to minimize downside risks.

UBS also feel that Malaysia has a defensive market and also is a bit secure during the trade war which destabilizes markets.

A defensive investment strategy is where a portfolio with assets is developed purposely to reduce the risk of losing the initial invested amount.

As the trade war goes on, Malaysia seems to be one of the countries that will highly benefit from the tensions by attracting more investors.

Speaking to CNBC on Tuesday, Muhammed Abdul Khalid, who is an economic analyst and advisor to Prime Minister Mahathir Mohamad, said that the country’s economy would grow by 0.1 percentage points. He attributed the forecast to companies relocating their manufacturing out of China (Malaysia could benefit massively) due to the ongoing trade spat.