The Malaysian furniture sector seems to be emerging as an evident winner of the trade diversion arising from the US-China trade war, but share prices of furniture stocks continue to be lackluster.
According to AmInvestment Bank Research (AmResearch), it is comprehensible as such players usually have small market capitalization and share liquidity. Furthermore, the sector is under-researched and needs investor relations initiatives.
The research house stated as furniture exports from Malaysia are free of the tariff spat, it translates into a great price advantage for Malaysian furniture exporters over their Chinese counterparts in the US market.
“We gathered from furniture companies we met up with recently that they have indeed profited from the trade diversion from the ongoing US-China trade war.”
AmResearch noticed that the furniture exporters have observed increased orders in their operations in Malaysia and some players have also seen a similar trajectory for their expanded operations in Vietnam.
AmResearch expected furniture exports from Malaysia to grow 6.1% to US$2.7 billion (RM11.3 billion) in 2019, a 3.1% growth against 2018.
Worth to mention is that main Malaysian furniture players already have a significant presence in Vietnam.
But, the research house is watchful of the risk that the US Department of Commerce could impose duties on Vietnamese goods to stamp out the rerouting of Chinese goods to the US.
“This could entirely erase the price advantage of Malaysian players in Vietnam over Chinese players,” it said.
AmResearch emphasized that Malaysian furniture manufacturers could capitalize on the situation by entering into a genuine joint venture model with Chinese parties, aside from the usual “rerouting” model.