Bullish outlook for Bursa Malaysia

PETALING JAYA: The local stock market is expected to outperform for the rest of the year after a massive sell-off amid fears of a recent US recession.

The Malaysian stock exchange closed slightly lower yesterday, snapping a two-day winning streak as investors grappled with market uncertainty.

However, experts remain optimistic about the possibility of improving the situation on the local stock exchange later in the year and in the longer term.

Tradeview Capital Sdn Bhd chief investment officer Nixon Wong said the local stock market is poised for further improvement, supported by initiatives such as the National Energy Transformation Roadmap (NETR), New Industrial Master Plan (NIMP) and special economic zones (SEZs).

“After the recent price correction, valuations have returned to more attractive levels, creating more buying opportunities.

“Bursa Malaysia remains a defensive market with a relatively low beta, which can attract fund flows in a risk-off environment,” Wong told StarBiz.

He highlighted several key factors that will impact the market, including the upcoming corporate reporting season, the US Federal Reserve’s interest rate decisions and the 2025 budget.

He noted that while the ongoing subsidy rationalisation could have a negative impact on consumption, it could strengthen the fiscal position and improve the value of the ringgit, potentially attracting more foreign investment.

Similarly, wealthy investor and former investment banker Ian Yoong Kah Yin also expressed optimism about Bursa Malaysia, attributing this positive outlook to Malaysia’s strong economic growth.

“Significant (economic) growth is evident across almost all sectors. Foreign investors have returned in droves. Confidence has spread to domestic businesses, given that Malaysians are usually our worst critics,” Yoong said.

He expected Malaysia’s gross domestic product (GDP) to grow by 5.6% this year, a significant increase from the 3.6% recorded in 2023, driven by strong domestic demand and export performance.

Yoong also highlighted the benefits Malaysia has reaped from China’s “plus one” trend, noting that Malaysia has been the biggest beneficiary in Southeast Asia.

In terms of investment strategy, Wong suggested adopting a balanced strategy of taking profits from thematic stocks while also focusing on strong stocks with healthy fundamentals and positive cash flows to support dividend payouts.

“Given that the recent market decline was driven by panic selling and margin calls in response to negative headlines, and given that the underlying fundamentals, while weakening, are not as bad as feared, we view the current weakness as a good opportunity to buy solid stocks at more attractive valuations,” he explained.

Wong suggested a cautious approach, recommending that investors consider investing some cash in stocks with positive near-term catalysts that were previously too expensive.

“Our goal is to minimize investments in thematic stocks where valuations are still high and earnings may not materialize in the near term, and instead focus on those that have strong fundamentals, cash flows and dividend yields to support the downside,” he added.

However, Wong drew attention to the risk posed by the publication of economic data from the United States, which may turn out to be much worse than expected or indicate a higher probability of recession.

Yoong highlighted the opportunities presented by the development of sectors benefiting from the expansion of data centres in Malaysia.

He stressed that energy producers such as Tenaga Nasional Bhd and Malakoff Corp Bhd are poised for significant growth as data centres are expected to be major consumers of electricity.

“The renewable energy sector will benefit the most in the long term,” he added.

Yoong believed that strong performance by domestic large-cap stocks could push the FBM KLCI index up from its current level of 1,590 to 1,800 by the end of 2025.

Yesterday, the FBM KLCI fell 1.49 points, or 0.09%, to 1,590.38 from Wednesday’s close of 1,591.87.

Yesterday, the index opened 5.91 points lower at 1585.96, and throughout the trading session it fluctuated between 1579.69 and 1593.24.

In the broader market, falling stocks outnumbered advancing stocks by a ratio of 651 to 445, with 467 stocks unchanged, 880 no-deal stocks and nine others suspended.