Cambodian stocks likely to soar amid global rate cut, trade tariffs

Cambodian stocks likely to soar amid global rate cut, trade tariffs

With some G7 countries cutting interest rates, the US is likely to relook at its tariffs in the coming days. Going by the trend, there is growing optimism about a potential rebound in global demand, an indication that could support Cambodia’s export outlook.

The US remains one of Cambodia’s largest trading partners, especially in garments, textiles, and footwear (GTF) sector. However, the recently imposed 49 percent tariff on Cambodian exports has not only placed the country in an awkward position within ASEAN but also raised broader concerns about long-term economic health. The impact is likely to affect key sectors, including among listed companies on the Cambodia Securities Exchange (CSX).

Despite the external headwinds, some CSX-listed companies continue to perform well; and at the same time, the US economy is beginning to show signs of a slowdown, with GDP contracting by 0.3 percent in the first quarter of 2025 — the first decline in over two years.

The latest US economic data released on April 30 suggests growing pressure on the Federal Reserve to consider cutting interest rates at its upcoming meeting on May 8. Meanwhile, inflation indicators remained soft: the Core PCE Price Index (MoM) was flat at 0.0 percent, Personal Spending (MoM) rose to 0.7 percent, up from 0.5 percent the previous month, and Core CPI (MoM) came in at just 0.1 percent. With these four indicators, the Fed may feel more confident in lowering rates to support the economy. Theoretically, a rate cut would reduce borrowing costs for manufacturers and businesses, create more jobs, and stimulate consumer demand — all of which could benefit trading partners like Cambodia through stronger US import demand.

In 2024, Cambodia’s exports to the US reached nearly $10 billion, representing an 11 percent increase compared to 2023 – driven mainly by the GTF sector. This growth highlights the US as Cambodia’s largest export market, which supports hundreds of thousands of jobs.

If the Fed proceeds with interest rate cuts in the upcoming meeting, US consumer demand is likely to strengthen, which could benefit Cambodia’s export performance further. A sustained rise in exports would not only support the country’s GDP but also benefit listed companies on CSX with exposure to garments and logistics.

The performance of listed companies on CSX shown mixed trends during Q1 of the year. While some stocks experienced growth, others faced fluctuations and downward momentum. Notably, GTI, MJQE, and PEPC have been on growth momentum. In contrast, PWSA, PPAP, and PAS displayed more fluctuating movements, whereas ABC, PPSP, and CGSM have experienced a downward trend.

Focusing on the garment and logistics sectors – both of which stand to benefit from rising external demand – GTI and PAS have shown notable performance.

According to the data from CSX, trading volume for GTI and PAS remained bullish throughout April, reflecting growing investor confidence despite uncertainty over the trade tariff. Meanwhile, the CSX Index itself dipped to a quarterly low in early April but has rebounded to more than half of the downward – signalling that overall market sentiment remains optimistic.

Investors around the world are closely watching the upcoming federal fund rate announcement, as it will shape their next investment moves. A rate cut would signal stronger consumer demand in the US, potentially benefiting Cambodia’s export-driven sectors. However, monetary easing alone can’t compensate effects of trade tariffs. The ongoing uncertainty the 49 percent tariff on Cambodian goods has raised serious concerns about the country’s economic outlook.

If the tariff was fully enforced, Cambodian’s GTF sector would lose competitiveness in the US market. Importers and investors may alter supply chains to countries with lower labour and tax costs, reducing Cambodia’s export volume. These shifts would have broader consequences across various sectors – particularly employment in the GTF industry, which remains one of the largest job providers – according to Asia Garment Hub, the GTF sector has a workforce exceeding 833,100 employees. While rate cuts may offer some relief by boosting demand, they are unlikely to fully counterbalance the long-term impact of trade barriers.

All eyes will be on how the Fed and the Trump administration will evolve in the months ahead. The performance of exported-focused stocks like GTI and PAS will serve as a barometer to gauge investor sentiment. Amid these challenges, there may have a trade-off, which in turn could be an opportunity for Cambodian exporters to maintain momentum.

khmertimeskh