The FBM KLCI Index, Malaysia’s benchmark for equity performance, is heading into the final week of 2024 with subdued momentum. Analysts note that window-dressing activities, which typically mark year-end trading, remain muted. This hesitation among fund managers has left the index struggling to stay above the 1,600-point level.
Key Market Influencers
Foreign investors have sold off RM1.07 billion worth of shares, marking nine weeks of continuous outflows. Several factors have contributed to this trend, creating challenges for the market to regain its footing.
Factors Impacting the Market:
- US Federal Reserve Rate Guidance: The Fed recently reduced its rate cut expectations for 2025 from four to two. This decision disappointed investors, particularly in emerging markets like Malaysia.
- Strengthening US Dollar: The Dollar Index climbed past 108, placing pressure on regional currencies and affecting investor sentiment.
- Policy Uncertainty: Concerns about US President-elect Donald Trump’s incoming policies and China’s economic slowdown have added to the cautious outlook.
Sectoral Outlook for 2025
Although challenges persist, analysts have identified key sectors likely to see growth in the upcoming year.
1. Construction
The construction industry is expected to thrive, with a projected RM200 billion in public and private investments. Budget 2025 includes RM86 billion for infrastructure development, which could drive a strong rally in this sector.
2. Technology
Global semiconductor sales are predicted to grow by 19% in 2025, reaching $626.9 billion. Malaysian technology companies, with their export-oriented focus, are positioned to benefit from increased demand and the stronger US dollar.
3. Renewable Energy (RE)
With Malaysia committed to achieving net-zero greenhouse gas emissions by 2050, the renewable energy sector continues to gain support from government incentives. This area is seen as a long-term growth driver for the economy.
Analyst Insights
Experts remain cautious about the market but highlight potential opportunities for recovery.
- Mohd Redza Abdul Rahman, BIMB Securities, observed declining trading volumes and limited movement among heavyweight stocks. He attributed the soft market to external uncertainties and the strengthening US dollar.
- Kenneth Leong, Apex Securities, believes that foreign fund outflows will persist until there is greater clarity on global policies. However, he expects gradual improvement in market sentiment as uncertainties diminish.
Positive Signals for the Future
Despite current challenges, there are reasons for optimism. Malaysia’s role as ASEAN Chair in 2025 is expected to boost tourism revenue, particularly from MICE (Meetings, Incentives, Conferences, and Exhibitions) activities. Additionally, higher wages and government-led initiatives, such as the National Energy Transition Roadmap, could drive domestic consumption and support economic growth.
Market Forecast for 2025
Looking ahead, analysts anticipate a stronger performance for the FBM KLCI. MIDF Research forecasts the index to reach 1,800 points by the end of 2025, supported by resilient corporate earnings and improved foreign investor confidence.