· Trump-Xi summit eases near-term trade tensions, with the US-China trade truce extended to 10 January 2027, but major structural disputes remain unresolved.
· Malaysia stands to benefit from greater trade visibility, given strong exposure to both China and the US, with E&E exports remaining a key growth driver.
· Budget 2027 on 9 October could trigger a Pre-Budget Rally.
· Maintain our Barbell Strategy, favouring AI and semiconductors, data centre infrastructure, energy transition, critical minerals and consumer digitalisation, alongside defensive exposure to Utilities and Plantation.
· Maintain our year-end KLCI target of 1,770.
Quick Take
The Trump-Xi summit in Washington on 24 September produced a series of measures to stabilise bilateral ties, but fell short of a comprehensive trade agreement. Most importantly, ahead of the leaders' meeting, US Treasury Secretary Scott Bessent announced that the existing US-China trade truce would be extended by two months from its scheduled 10 November 2026 expiry to 10 January 2027, buying both sides additional time to negotiate a broader economic arrangement.
The two countries agreed on a framework covering US$30bn of reciprocal tariff reductions, the operationalisation of their Boards of Trade and Investment, and the establishment of a bilateral dialogue on “super intelligence” and AI-related incidents. China also committed to importing at least 10m tonnes of US coal annually in 2027 and 2028.
However, the summit did not resolve several structural areas of contention, particularly rare earth supplies, advanced technology restrictions, Taiwan and the US-China positions on Iran. The extension therefore represents a pause in escalation rather than a fundamental reset in bilateral relations.
Our View
We see the Trump-Xi summit as particularly important to the Trump administration, underscored by Trump’s rare decision to personally welcome Xi at Joint Base Andrews on 23 September. The gesture was unusually rare, with the last comparable presidential airport welcome at Andrews dating back to 1962, when President John F. Kennedy greeted UK Prime Minister Harold Macmillan.
The symbolism is notable given that Trump is approaching the November 2026 US midterm elections. While there is no official evidence that the airport welcome was specifically motivated by electoral considerations, maintaining a more stable relationship with China could help reduce another source of economic and trade uncertainty at a politically sensitive time.
Against this backdrop, we see the summit as a reduction in near-term US-China trade uncertainty rather than a fundamental reset in bilateral relations. The extension of the trade truce to 10 January 2027 gives companies additional time to plan around tariffs and supply-chain arrangements, while the new bilateral mechanisms provide channels for continued negotiations.
However, the official outcomes do not indicate that the major structural disputes have been resolved. Rare earths and critical-mineral supply remain under discussion, while the newly established AI dialogue addresses communication and risk management rather than the broader US-China technology rivalry.
The next important checkpoints are the APEC Economic Leaders' Meeting in Shenzhen on 18-19 November 2026 and the G20 Leaders' Summit in Miami on 14-15 December 2026. Both governments said Trump and Xi intend to attend each other's meetings, providing further opportunities to assess whether the current trade détente can be sustained.
For Malaysia, the continued stability in US-China relations is relevant given the country's substantial trade links with both economies. During January-August 2026, Malaysia's trade with China increased 35.0% y-o-y to RM456.68bn, while trade with the US rose 35.7% to RM328.84bn. E&E products were an important driver of exports to both markets.
Market Implications
The latest US-China developments should reduce near-term trade uncertainty and support regional risk sentiment, with both sides pursuing more favourable tariff treatment for US$30bn of non-sensitive goods and strengthening bilateral trade, investment and AI dialogue. However, ongoing negotiations over rare earths and other critical minerals indicate that structural supply-chain risks remain.
For Malaysia, the stabilisation in US-China trade relations is broadly constructive given its strong exposure to both markets, while sustained E&E demand continues to underpin export growth and the regional semiconductor supply chain.
Technical Analysis - Potential Bottoming Ahead of Budget 2027
For the FBM KLCI, as highlighted in our previous Market Outlook report on 3 September 2026, a sustained break below the 1,700 level could pave the way towards the next support zone at 1,685. This subsequently materialised, with the index falling to as low as 1,661. We had also advised investors to monitor price action for signs of stabilisation before increasing exposure.
At current levels, we see early signs of stabilisation as the KLCI approaches the lower boundary of its descending trend channel. With 2027 Malaysia Budget scheduled to be tabled on 9 October 2026, we expect expectations of a Pre-Budget Rally to provide near-term support to the market.
Strategy
We believe the summit is market-positive from a risk-premium perspective, but unlikely to trigger a major re-rating on its own. The key takeaway is that the US-China relationship has shifted towards managing competition rather than resolving it. As the trade truce now runs until January 2027, markets are likely to focus increasingly on implementation, particularly tariff arrangements, rare earth shipments and technology restrictions, rather than diplomatic optics.
We therefore retain our barbell strategy, balancing defensive, earnings-resilient companies with high-quality structural growth stocks. Our preferred growth themes include AI and semiconductors, data centre infrastructure, energy transition, critical minerals and Consumer digitalisation, while Utilities and Plantation provide defensive earnings support.
Domestically, attention will now turn to the Melaka state election following the dissolution of the state assembly on 23 September 2026. Political uncertainty could rise in the near term as parties negotiate seat allocations and electoral cooperation. However, the state government has indicated that administration and public services will continue as usual during the caretaker period, suggesting limited disruption to economic activity.
We maintain our FBM KLCI year-end target at 1,770, as the easing in US-China tensions could help reduce near-term geopolitical risk, although domestic political developments and broader policy and trade uncertainties remain key factors for market sentiment.
Disclaimer
The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.
Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.
| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.066846 | 4.098389 |
| EUR | 4.642019 | 4.645551 |
| CNY | 0.607873 | 0.608337 |
| HKD | 0.518664 | 0.522176 |
| SGD | 3.182150 | 3.203807 |