Tan Sri Abdul Wahid Omar, Chairman, Bursa Malaysia
Contributed by Tan Sri Abdul Wahid Omar
The year 2024 has been a good year for the Malaysian equities market, with year-to-date (YTD) Dec 9, 2024 average daily trading value up by 55% to RM3.2 bil, FBMKLCI up by 10.8% to 1,611 points and overall market capitalisation crossing the RM2 trillion mark since May 2024.
The growth is broad-based with the FBM Emas index up by 13.9% and the property sector index up by 27.1% YTD. Malaysia also emerged as the most vibrant IPO market in Asean YTD Nov 2024, with 47 listings and US$1.518bil (RM6.741bil) raised, ahead of Indonesia with 39 listings (US$372mil), Thailand with 30 listings (US$769mil) and Singapore with 6 listings (US$34mil). We expect to close the year 2024 with a total of 55 IPOs, 72% higher than the 32 IPOs in 2023.
2025 market outlook
President-elect Donald Trump will return to the White House in January, following the Republican’s trifecta win in the US elections, paving the way for lasting changes. Trump 2.0 brings uncertainties over US trade policy and tariff measures. However, we expect global manufacturing supply chains to continue to shift into Asean due to continued US-China tensions and the potential broadening of the trade war to Mexico and Canada.
Trump is also threatening 100% tariffs on BRICS countries if they attempt to replace the US dollar with their own reserve currency. Malaysia should remain a key beneficiary of the China + 1 movement, with a focus on technology, manufacturing and electrical and electronics (E&E) counters, particularly semiconductor manufacturers. However, Malaysia faces adverse impacts if exports to the US are hit with additional 10-20% tariffs, alongside the rest of the world (RoW), ex-China, based on Trump’s plan.
On the local front
Data centres have emerged as a strong FDI and growth driver in Malaysia, due to our affordable land, reliable power supply, cheap labour and telecommunications infrastructure. According to data from the Malaysia Digital Economy Corporate (MDEC), Malaysia has seen RM99bil of data centre investments announced, with another RM149bil in the pipeline. Construction and Utilities have been clear winners, with the sectors up by 56.5% and 30.3%, respectively, YTD.
Key investments include AWS’ plans to invest RM29.2bil through 2038, Google’s commitment to developing its first data centre and establishment of a cloud region with a US$2bil investment, Microsoft’s US$2.2bil over the next four years to build cloud and AI infrastructure, and Nvidia’s partnership with YTL Power for USD4.3 bil AI data centres in the country. We expect this sector to remain a power play for Malaysia.
New policies to solidify growth strategies
The government has announced various roadmaps and initiatives since 2023, notably the Madani Economy Framework, NETR Phases 1 and 2, NIMP 2030 and the 12th MP mid-term review. Next year should see several more key policies to further solidify execution for growth.
♦ All eyes on Johor: The signing of the Johor-Singapore Special Economic Zone (JSSEZ) agreement is now expected in Jan 2025, delayed from Dec 2024. This will be a catalyst for further growth in the Southern region and is expected to spur investment flows, drive job creation and strengthen economic integration. Construction and Property (YTD: +27.1%) counters should continue to benefit, particularly with the Johor Bahru-Singapore Rapid Transit System (RTS) on track for commercial operations by early 2027.
♦ RON95 petrol subsidy rationalisation: The RON95 subsidy reform is expected to be introduced in mid-2025 through the implementation of a two-tier pricing mechanism. Under this mechanism, eligible recipients will pay the subsidised price of RON95, while those not eligible will pay the market price.
♦ Other key policy events: The 13th Malaysia Plan should be announced in mid-2025, while the launch of the National Investment Incentives Framework (NIIF) is expected in 3Q25, focusing on high-value-added and strategic sectors, industries and areas.
♦ Interest rate and MYR outlook: The US Fed began its easing cycle in Sep 2024 – the first cut since 2020. Consensus has a neutral view on interest rates, with economists expecting BNM to hold the OPR at 3.00% in 2025.
We expect a continued vibrant IPO market and upside for the FBMKLCI Index in 2025. Based on the healthy pipeline, we expect another vibrant year for IPOs in 2025. And considering the various factors mentioned above, the end-2025 target for the benchmark index sees a strong upside across most research houses.
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