Kuala Lumpur, Malaysia – Once considered a laggard in the region, Malaysia’s stock market is making a remarkable turnaround, driven by a surge in economic growth and significant investments from US tech giants.
After years of sluggish performance, the Bursa Malaysia is on the rise, with the benchmark index climbing as much as 17% over the past year. This resurgence has been fueled by the nation’s robust post-pandemic economic recovery and increased foreign investments, particularly from technology companies like Nvidia, Google, and Microsoft.
The stock market has seen a surge in interest from investors, with 289,000 new trading accounts opened in the first seven months of 2024 alone—almost double the total accounts opened in 2023. This renewed investor interest signals growing confidence in Malaysia’s market prospects.
Emerging from a “Lost Decade”
Stephen Yong, a licensed financial planner with Wealth Vantage Advisory, describes this recovery as the end of a “lost decade.” “The market was previously undervalued, and there was little upward movement,” he said. According to Yong, many companies had been trading below their value for years, leaving room for significant growth as investor confidence returns.
Yong further noted that Malaysia is now benefiting from the shift in global investment trends towards the Asia-Pacific region. “The outlook is positive as we enter a recovery phase,” he said.
Over the past decade, political uncertainty and economic challenges contributed to the stagnation of the Malaysian stock market. The Kuala Lumpur Composite Index (KLCI), which includes the top 30 companies by market capitalization, hovered between 1,500 and 1,900 points throughout the 2010s. Political turbulence, including frequent changes in leadership and the 1MDB financial scandal, coupled with the global economic slowdown caused by COVID-19, eroded investor confidence.
In 2019, a Bloomberg article even labeled Bursa Malaysia as the “world’s worst major stock market” after it suffered a 14% decline over the course of a year.
The Road to Recovery
Veteran investment banker Ignatius Luke Jr. Tan, with over 40 years of experience, notes that Malaysia’s stock market had been in a state of stagnation. Once seen as a rising star in the 1990s, Malaysia began to lose momentum following the Asian Financial Crisis in 1997-1998.
“The stock market reflects the economy, and post-2005, our economy was just chugging along,” said Tan.
However, the tide is changing. In 2024, a number of key economic indicators have bolstered market sentiment. Malaysia’s gross domestic product (GDP) grew by 5.9% in the second quarter, the largest expansion in Southeast Asia outside of Vietnam and the Philippines. Additionally, the country recorded over 83.7 billion ringgit ($19.3 billion) in approved investments in the first quarter of 2024, a 13% increase from the previous year, with more than half coming from foreign sources.
In the week ending August 30, foreign investors purchased a net total of 1.50 billion ringgit ($34 million) in Malaysian stocks—the largest net buying since 2016.
Rising IPO Activity
Initial public offerings (IPOs) have also picked up significantly. The Bursa saw 34 new IPOs in the first nine months of 2024, compared to 31 for all of 2023. One notable debut was that of 99 Speed Mart, which raised 2.36 billion ringgit ($542.8 million) in the country’s largest listing in seven years.
While Malaysia’s stock exchange, valued at nearly 2 trillion ringgit ($430 billion), remains smaller compared to regional peers like Tokyo, Seoul, and Mumbai, its recent performance has been impressive. A report by Deloitte highlighted that Malaysia led Southeast Asia in IPO fundraising during the first half of 2024, raising approximately $450 million.
What’s Driving the Market?
Analysts attribute this resurgence to stronger economic fundamentals. A spokesperson from Bursa Malaysia pointed to several macroeconomic factors contributing to the positive performance, including the strength of the local currency, increasing foreign direct investment, and recovery in corporate earnings.
“There is still room for growth toward the end of the year, with potential catalysts such as rate cuts by the US Federal Reserve, continuous FDI inflows, and new infrastructure projects,” the spokesperson said.
However, despite the positive momentum, seasoned market watchers advise caution. A remisier with four decades of experience in securities trading noted that while the market’s performance is encouraging, it remains susceptible to fluctuations, particularly from foreign investors.
“There’s no telling when foreign investors might decide to pull out. They can be quick to cut their positions and exit once they find opportunities elsewhere,” the remisier said, preferring to remain anonymous.
Stability Amid Political Change
Malaysia’s improved political stability has also played a role in restoring investor confidence. Despite Prime Minister Anwar Ibrahim’s approval ratings falling from a high of 68% after his election in November 2022, he has managed to maintain his position, outlasting his three immediate predecessors.
While risks remain, including global financial volatility and potential disruptions in supply chains, local experts remain optimistic about the market’s trajectory. Eza Ezamie, managing director of Laughing Tree, a business funding platform, believes Malaysia’s stock market will continue its upward trend as long as the country maintains consistent economic policies and keeps inflation under control.
“As long as we keep our GDP numbers strong and inflation stable, the stock market should continue to grow,” Ezamie said.