Countdown to Tariff Deadline: What's at Stake?
The 90-day window set by U.S. President Donald Trump for major trading partners to secure new trade agreements is set to expire on 9 July. While initially framed as a hard deadline, recent developments suggest that limited extensions may be granted—though only to countries deemed to be actively negotiating in good faith.
The U.S. is reportedly preparing to send formal letters to 12 to 15 countries, outlining final trade offer terms. These proposals are expected to be non-negotiable—positioned as “take it or leave it” deals. Extensions of up to 1 August may be granted for those willing to offer meaningful concessions.
Market Implications
The tariff range under consideration spans from 10% to as high as 70%, depending on the industry and negotiations. If imposed, these tariffs could have far-reaching implications across sectors, especially for trade-linked industries such as manufacturing, autos, and semiconductors.
Markets are closely watching how economies respond. The EU remains a key focus, though its response may be complicated by diverging interests among member states.
Meanwhile, China’s separate tariff truce with the U.S. expires on 12 August, adding another layer of complexity to trade dynamics in the coming weeks.
What Can Investors Do?
The expiry of the tariff deadline on 9 July will unlikely be the end of the Trump's populist trade and economic policies. We expect markets to remain sensitive to signals of progress or escalation in trade negotiations. Investors should continue to focus on building well-diversified portfolio anchored in quality and income-generating assets.
Our positioning remains focused on maintaining resilience amid shifting trade policies, with a close watch on developments that could influence risk appetite and capital flows globally.
US
It was a strong week for US equities, with the S&P 500 advancing 1.7% to close at a fresh record high. The rally was supported by stronger-than-expected US jobs data and renewed optimism over trade negotiations even as the 90-day tariff deadline looks. Market expectations are that the worst outcomes may once again be avoided and that we could see a further delay or pause.Asia
In Asia, the MSCI Asia ex-Japan index ended the week marginally lower at 0.4%, with gains largely muted. Markets that had rallied strongly in the prior week, including Taiwan and Korea, were mostly flat as investors digested a mix of political and trade-related headlines.The KLCI index rose by 1.44% week-on-week, lifted by gains in YTL Corporation Berhad, YTL Power International Berhad, and Gamuda Berhad, which continued to rally on growing interest in the data centre (DC) thematic.
The notable laggard for the week was Tenaga Nasional Berhad (TNB), following the announcement of a Federal Court ruling against the utility giant in a long-standing tax dispute with the Inland Revenue Board (IRB). The case involves additional tax claims amounting to approximately RM1.25 billion for the Year of Assessment 2018.
On the fund flow front, foreign investors turned net buyers last week after six consecutive weeks of net selling, reflecting a shift towards a more risk-on sentiment. Year-to-date, however, foreign outflows stand at around RM12 billion, with foreign shareholding in Malaysian equities falling to a record low of 19%.
In global developments, the United States government announced plans to restrict shipments of AI chips from companies such as NVIDIA Corporation to countries including Malaysia and Thailand, in a move aimed at preventing re-routing into China. The potential impact appears most pronounced for NationGate Holdings Berhad and to a lesser extent YTL Power International Berhad, given their direct business ties with NVIDIA. However, the funds under our management do not have meaningful exposure to either of these companies.
Regarding the broader data centre theme, we believe the overall impact from the US export curbs will be limited, as 90% of committee-approved DC projects in Malaysia are still cloud-based rather than AI-based. As such, we expect minimal disruption to infrastructure contractors such as Gamuda Berhad and Sunway Construction Group Berhad (SunCon) in the medium term.
In terms of portfolio positioning, our funds were seen trimming positions in the healthcare sector while adding exposure to construction, technology, and property names. Cash levels across portfolios ranged between 10% to 20% last week.
Regional Fixed Income
Asian credit markets continued to show strength last week, supported by a firm risk-on tone across both investment grade and high yield segments. While most trading activity centred around new issuances, performance in the secondary market remained broadly positive.
Asian investment grade (IG) bonds tightened by around 4 basis points (bps), while Asian high yield (HY) rallied close to 90 bps. Interestingly, US markets outperformed, with US IG tightening by 8 bps and US HY by 24 bps, reflecting healthy global demand for credit.
In Asia, political developments in Thailand initially weighed on sentiment, with some selling pressure observed in Thai names, particularly in the banking and oil and gas sectors. However, sentiments stabilized and credits spreads have largely recovered by the end of the week.
Despite the holiday-shortened week, the primary market remained active, with around USD 9 billion in new issuances, mainly from Japan and South Korea. The most notable deal came from SoftBank Group Corp., a BB+ rated high yield issuer, which successfully priced a multi-tranche USD and EUR bond totalling USD 4.2 billion. The order book peaked at USD 17 billion, signalling strong investor interest.
Separately, SoftBank Corp., the group’s investment-grade telecommunications arm, also came to market with a USD 1 billion dual-tranche issuance across 5-year and 10-year maturities at around 4.70% and 5.30% respectively. This deal was also well received by the market.
From a portfolio perspective, we took profit on some recently issued bonds, including Nomura Holdings Inc. AT1, Resolution Life Group Holdings Ltd. Tier 2, and Saudi National Bank Tier 2 bonds. Proceeds were rotated into selected new issuances. We also added some position in Australian corporate hybrid securities.
Domestic Fixed Income
The domestic bond market remained stable and ended the week on a firm footing, despite ongoing global trade uncertainties. Benchmark Malaysian Government Securities (MGS) yields moved slightly lower by 1 to 3 basis points (bps) across the curve. The 5-year MGS yield eased by 1 bp to 3.18%, while the 10-year declined by 3 bps to 3.44%, dipping below the 3.50% threshold. The 30-year MGS closed at 4.00%, down marginally by 1 bp.
There was one government bond auction last week — a reopening of the 7-year Government Investment Issue (GII) with an issuance size of RM5 billion via public auction. The auction drew strong investor interest, recording a bid-to-cover (BTC) ratio of 2.92 times. The average yield came in at 3.367%, with the high at 3.37% and low at 3.36%, reflecting a tight range.
The upcoming government bond issuance will be a 30-year MGS maturing on 7 July 2055, which is a new issuance. The total expected issuance is RM5 billion, comprising RM3 billion via auction and RM2 billion via private placement.
In the corporate bond (PDS) market, we participated in a new issuance from DRB-HICOM Berhad, rated AA-. The total issuance was RM500 million, and we secured an allocation of RM20 million in the 7-year tranche. The bond priced at 3.88%, with a credit spread of +49 bps, reflecting strong demand in a tight corporate spread environment.
In terms of portfolio positioning, we were net sellers last week. The objective was to raise liquidity and prepare for a healthy pipeline of upcoming primary issuances, particularly within the AAA to AA credit space. Cash levels across portfolios are currently around 3%, as we have already begun rebalancing in anticipation of deploying into new opportunities. Portfolio duration remains steady in the range of 6.8 to 7 years.