KUALA LUMPUR, July 29 (Bernama) -- Bursa Malaysia rebounded to close higher on Wednesday on selective buying of defensive stocks after a volatile trading session. IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said consumer products and services stocks lifted the key index higher, overcoming lingering geopolitical concerns. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 3.08 points to 1,715.56 from yesterday’s close of 1,712.48. The benchmark index, which opened 1.91 points higher at 1,714.39, moved between 1,710.79 and 1,720.59 during the day’s trading. In the broader market, gainers outstripped decliners 550 to 476, while 612 counters were unchanged, 1,129 untraded, and 48 suspended. Turnover rose to 2.96 billion units valued at RM2.48 billion from 2.94 billion units valued at RM2.56 billion on Tuesday.
The proposed $14.9 billion takeover of US Steel by Japan's Nippon Steel has raised national security concerns in the US, with fears that the acquisition could jeopardize the supply of steel crucial for key sectors like transportation, construction, and agriculture. The Committee on Foreign Investment in the United States (CFIUS) outlined these concerns in a 17-page letter to both companies.
Key Takeaways:
National Security Concerns Cited by CFIUS: CFIUS argues that Nippon's control over US Steel could lead to reduced domestic steel production capacity. The committee also emphasized that Nippon, as a foreign entity, may be less inclined to seek trade protections against cheap foreign steel, particularly from China, which continues to flood global markets with low-cost exports due to government interventions. This position reflects apprehensions about the potential for a weaker stance on protecting US steel interests under foreign ownership.
Political and Trade Implications: The proposed deal has become politically contentious, with both Republican and Democratic lawmakers expressing opposition. Vice President Kamala Harris and former President Donald Trump have voiced their intent to block the merger if it poses a threat to US interests. The Biden administration appears to be gearing up to block the deal on national security grounds, though some experts argue that the objections may stem from protectionist and political motivations rather than genuine security risks.
Nippon Steel's Counterarguments and Proposed Mitigations: In response, Nippon Steel has pledged to invest billions of dollars to maintain and potentially increase US Steel’s domestic production capacity. It has promised not to relocate any production or jobs outside the US and to support US Steel’s independent decisions on trade matters. Additionally, Nippon proposed a national security agreement, including assurances about board composition and oversight by CFIUS-approved independent directors, to mitigate perceived risks and demonstrate its commitment to US interests.
Nippon Steel aims to position the merger as a strategic alliance to strengthen competition against China while addressing US security concerns. However, the political and regulatory landscape in the US suggests a challenging path ahead for the proposed deal.
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