‘Relocation of industries to US’ sparks concerns

The technology sector is likely to be most affected, said analysts, while others like resource-based industries in, for example, palm oil-related products, furniture and gloves, may not be badly affected.
Operating costs, wage differentials and the higher cost of end products in the long run are major concerns.
A close watch is being maintained on companies under coverage, pending further details.
“Sentiment on local manufacturing may be hit later in the year as this news flow heats up. 
“But it will probably not be major and profits now seem largely intact,” said Chris Eng, head of research at Etiqa Insurance and Takaful.
If there is any selldown on tech companies, it may happen perhaps in April or May, according to Eng.
The impact is compounded by the local ruling on repatriation of the bulk of export earnings to Malaysia.
“It will be significant for tech products especially in conjunction with the ruling on export proceeds with which even foreign companies have to comply. 
“For US-based investors, this exposes them to foreign currency risks and losses if the ringgit keeps weakening. 
“Their balance sheets are translated into and reported in US dollars,” said Pong Teng Siew, head of research at Inter-Pacific Securities.
Electronic and electric as well as garment companies in Malaysia, which are mainly subcontractors for multinational companies, may be affected should they decide to bring back manufacturing jobs to the US, an analyst said.
Pending further announcements, direct and indirect exports especially from Malaysia and Vietnam may be impacted, said Danny Wong, CEO of Areca Capital.
Major US factories in Malaysia producing electronics would be under watch. “Many of these companies also produce dual-use electronics that can have military applications. Such products have not been allowed to be made in China and had assured us of a niche, in the past.
“This kind of manufacturing for use in the US military will be required to be produced in the United States from now. 
“This kind of work may disappear from here. A Penang-based supplier of electronics equipment estimated that his orders are down 50 per cent since late last year,” Pong said.
There could be incentives for moving back.
“At this stage, any significant impact is not expected. 
“We’ll need to see what the Trump administration comes up with in terms of incentives for US manufacturers to stay and expand domestically, or import taxes.
“Some US imports for military use could be impacted but these could be high-end components which the Malaysian economy may not have a big exposure to.
“It is not the case for Malaysian-listed companies, for example, semiconductor companies that provide packaging services which are much more competitive and cost productive compared to the US set-ups,” said Vincent Khoo, head of research at UOB Kay Hian.
Countries that export pharmaceutical products to the US will likely be impacted via restrictions on pharmaceutical imports and manufacturing abroad.