THE Malaysian bourse has been on a roller-coaster ride this year, and 2025 brings more uncertainties, with Donald Trump being sworn in as the 47th president of the United States in January.
Then, there are other possible market disruptors like wars in Ukraine and the Middle East which could cause issues to supply chains and amplify inflationary pressures.
StarBiz 7 talks to fund managers to see how the stock market will perform in 2025.
Giving their views are Fortress Capital Group chief executive officer (CEO) Datuk Thomas Yong, Areca Capital’s CEO Danny Wong, Trident Analytic chief research officer Lim Tze Cheng, StashAway Malaysia country manager Wong Wai Ken and Hong Leong Asset Management CEO Chue Kwok Yan.
StarBiz 7: What is your outlook on the Malaysian stock market in 2025?
Yong : I am neutral on the outlook of the Malaysian stock market. The FBM KLCI Index was up by a strong 15% for the first eight months of this year before fizzling out in the past three months.
This could be a sign that investors are taking profits ahead of major uncertainties like the Trump inauguration on Jan 20. The local market could remain volatile in the first half of next year, especially for companies that are reliant on exports and those that have high foreign fund ownership exposure.
Our stance is that as long as market expectation of further interest rate cuts keeps declining, it will be challenging for the Malaysian stock market to sustain a rally. We will turn bullish when market’s expectation of an interest rate cut is in line or less than the US Federal Reserve’s (Fed) guidance.
Danny: Malaysia’s stock market is anticipated to achieve stable growth in 2025, driven by strategic investments in data centres (DCs), a recovering semiconductor industry, and development initiatives in key economic regions. Benefitting from the China+1 strategy, Malaysia is increasingly attractive to global corporations diversifying supply chains amid US-China tensions.
The country’s established infrastructure, reliable power supply, and adequate water resources provide a significant edge over regional peers, especially for industrial investments. Growing Chinese investments in Asean and the relocation of manufacturing facilities to Malaysia further strengthen its position.
Lim: I am known to be an incurable optimist. The fundamentals of our economy are still strong. Our electrical and electronic sector is doing well, not only in terms of export growth but the number of foreign direct investments (FDI) and projects coming into the country, which to a large extent can be attributed to the US tariff.
Our two oils – crude oil and palm oil – are also enjoying high prices. In terms of domestic activities, we are seeing buoyant construction activities coming from DCs, infrastructures, and residential properties.
To a large extent, the stock market is a function of the economy. Against the backdrop of a buoyant economy, I expect the stock market to perform well.
Wai Ken: Malaysia’s stock market is poised for promising growth in 2025, thanks to domestic economic fundamentals and strategic fiscal policies. The Finance Ministry projects growth will be driven by strong domestic demand, rising exports and a tourism rebound.
The Kuala Lumpur stock exchange has already demonstrated impressive performance, recording a 15% gain in 2024 – its highest in over a decade. This growth has been fuelled by economic improvements, a strengthening ringgit, and increased foreign investor interest, pushing market capitalisation beyond RM2 trillion.
However, there are challenges. Domestic policies, including minimum wage increases and changes in taxation could reduce corporate profit margins. There are also external risks like a global economic recovery, inflation, and geopolitical tensions in Ukraine, Palestine and Syria that could cause market volatility.
Chue: Malaysia is experiencing an economic resurgence. The country’s gross domestic product (GDP) expanded by a robust 5.9% in the second quarter of 2024, surpassing expectations. This momentum is expected to continue into 2025, with the government projecting a GDP growth of 4.5% to 5.5%.
Potential key contributors to this growth include increased consumer spending, government investments in infrastructure, and a rise in exports driven by the recovery of global trade. Malaysia’s fiscal discipline and structural reforms are also likely to sustain investor confidence and provide a stable foundation for growth in the stock market.
StarBiz 7 : What will be some of the market themes and positive drivers versus downside risks in 2025?Yong: Positive drivers include strong GDP growth figures, supportive government policies, the mid-term review of the 12th Malaysia Plan, the Public Finance & Fiscal Responsibility Act, the Johor-Singapore Special Economic Zone, the National Semiconductor Strategy, DC FDIs and public infrastructure projects such as the Penang Light Rail Transit, Penang Airport expansion, the Subang Airport Regeneration Plan and the civil servant wage increase.
Downside risks include Trump’s trade tariff plans, less-than-expected Fed rate cuts and the Malaysian government’s policy execution delays/shortfalls.
Danny: GDP growth is projected at 4.5% to 5.5% in 2025, supported by Budget 2025’s emphasis on infrastructure development, digital economy initiatives, and renewable energy incentives.
Corporate earnings are forecast to grow by 6.2%, following a 16.0% increase in 2024, while the FBM KLCI is expected to reach a higher point near 1,700 points, adding a 6% growth to the current 1,600 points, reflecting steady investor confidence.
However, risks remain.
A “Trump 2.0” presidency could heighten global trade tensions with tariffs, fuelling inflation and potentially delaying the Fed’s rate cut cycle.
Geopolitical tensions like wars in Ukraine and the Middle East could disrupt supply chains and amplify inflationary pressures.
Lim: Let’s look at concerns first. After Trump’s victory, the US market has been very bullish. I expect a short-term correction - a healthy one - before the upward trend resumes.
The next concern would be what if US inflation resumes its upward trend resulting in the Fed holding its high interest rate for longer?
The third would be China – will the country be able to build back its economic momentum on the back of US’ tariff and technology restrictions?
Now for the positive drivers.Tech spending – be it in artificial intelligence (AI), DCs, and even consumer electronics, will continue into 2025. With inventories, both in the chips and equipment, running low, I expect to see replenishment activities.
Trump’s tariff crusade, while most view it negatively, will actually benefit countries such as Malaysia as the global sourcing trend undergoes changes – from China-reliant to non-China facilities.
Geopolitically, I am taking Trump’s word that the war will cease. War is never good for business (unless one is selling firearms), and a businessman-cum US president would know better.
Wai Ken: Malaysia is poised for robust economic performance in 2025, with projected growth of between 4.5% and 5.5%, building on a strong foundation of economic resilience and strategic reforms.
The country’s economic momentum continues from 2024, driven by favourable domestic and international conditions.
The services sector remains the primary growth driver, bolstered by tourism, sustained exports, and information and communication technology activities.
Chue: Malaysia continues to attract significant FDI due to its strategic location, its skilled workforce and supportive government policies. This influx of FDI is expected to further stimulate economic growth and create jobs. With these favourable factors, Malaysia can continue its upward trajectory and solidify its position as a preferred economy in South-East Asia.
Another plus point for Malaysia is its growing technology and DC industry.
The country is attracting investments in both areas, positioning itself as a regional technological and data hub. This development is driven by the extensive technological ecosystem, increasing demand for data storage and processing, as well as the government’s efforts to promote digital transformation.
As investors look to 2025, Malaysia presents a compelling opportunity.
Downside risks are mostly externally driven including geopolitical issues, trade uncertainties due to potential new tariff barriers and possible weakening of economic superpowers such as the United States and China that will weigh on global, and in turn, Malaysia’s growth.
StarBiz 7: What stocks / sectors will you be buying?Yong: We like the following sectors: Construction – The public infrastructure project pipeline is prospectively promising. This includes the Penang LRT (around RM10bil), West Ipoh Span Expressway (RM6.2bil), Penang Airport expansion (RM1.6bil), and close to 800MW of DCs committed in Malaysia.
Property – Companies are increasingly getting the opportunity to monetise their landbanks at very attractive rates especially when the landbank is sold to DC developers and turned into industrial estates i.e. Sime Darby Property
, Eco World Development and UEM Sunrise.
Residential properties are also gaining traction, especially those located in the Greater Iskandar region.
Telecommunication – Competition remains tight in the mobile segment, especially in the prepaid space, so fixed line operators would be a better investment. Moreover, fixed line operators with extensive fibre networks are likely to see higher demand from 5G base station connectivity requirements.
The recent merger of two major mobile network operators offers plentiful business synergies, while contributing to further consolidation of the mobile segment, which will eventually improve the pricing power.
Importantly, this sector offers decent dividend yield of >4% from revenues and profits that are largely domestically-driven, offering a form of safe-haven from global geopolitical and market risks.
Healthcare (hospitals) – The two major hospital operators surpassed earnings expectations with their latest results through strong patient traffic, and are likely to benefit further from increasing medical tourism traffic, which typically command 10% to 30% premium versus domestic patients.
Longer-term, both hospital operators are looking to grow their bed capacity. More importantly, the potential listing of Sunway Healthcare Group in 2026 will be supportive for investor sentiment and valuation of hospital operators as the group is expected to list at more than 20 times enterprise value / earnings before interest, taxes, depreciation and amortisation.
Danny : We have identified key themes expected to outperform in 2025. These are :
DC investments in Johor: Johor has emerged as Malaysia’s largest DC hub, securing RM51.1bil in 2022 and anticipating an additional RM17bil by the end of this year. Flagship projects are driving digital infrastructure expansion, boosting economic and corporate earnings growth.
Relevant sectors to DC theme are technology and IT infrastructure, renewable energy, construction and engineering.
Semiconductor recovery: The global semiconductor market is forecast to grow 12.5% in 2025, benefiting Malaysia’s supply chain, electronics manufacturing, and exports.
Relevant sectors: Electronics and semiconductors, manufacturing equipment, export-driven industries.
Sarawak’s development initiatives: Sarawak’s focus on infrastructure, renewable energy, and its digital economy supports sustainable growth, attracting investments.
Relevant sectors: Construction and infrastructure, renewable energy, consumer, technology and digital economy.
Trump-resilient investments: Industries driven by domestic spending and unaffected by potential US tariff threats present additional growth opportunities.
Relevant sectors: Consumer staples and discretionary, plantation, healthcare, infrastructure.
Should Trump implement high tariffs, global inflation could rise by up to 0.6% annually, potentially delaying the Fed’s rate cut cycle. Escalating geopolitical tensions, including the Ukraine and Middle East conflicts also threaten to disrupt supply chains further, dampening consumer sentiment and increasing market volatility.
Lim: I am still maintaining the semiconductor and EMS (electronic manufacturing services) space as my top sector call for 2025. In 2024, we saw the global tech players (from chipmakers to equipment players, and digital tech) do pretty well.
But the most asked question is – why isn’t the AI-led growth benefitting the local players?
What Nvidia is selling are the graphics processing unit (GPU) chips. GPU can’t function alone, it’s just the engine (using the analogy of a car). There is a lead time for taking the GPU and assembling it into a server – and thus the nine to 12-month lag,
The other parts of the chips that did not perform that well in 2024 are those related to the auto industry.
Except for China-led electronic vehicles (EV), sales for internal combustion engines and EV vehicles were challenging. In the consumer electronics space, the high-interest rate environment in the United States has deterred consumer spending.
In the semiconductor equipment space, equipment owners have been clearing their inventories – thus orders for new equipment fabrication were pretty muted.
Where does the optimism for 2025 lie?
AI servers, which includes other various types of chips (analogues, memory, data, etc), will raise the demand for most parts of the industry.
In the equipment space, inventories will have been run down this year, so we can expect new equipment fabrication activities to pick up.
In the automotive space, other than China companies gaining market shares from shipping out their excess EV production to ex-China markets, we expect the industry to remain challenging as western players adjust to their U-turn on the move to full EV.
However, further reduction in US interest rates may spur demand from automobiles in the country, not to mention consumer electronics as well.
Companies that I am expecting positive earnings trajectory in 2025 are Unisem and MPI (in the OSAT space), SAM Engineering, Mi Technovation, and UWC (in the equipment space, and addition of aerospace in the case of SAM), and Greatech (in the automation space).
In the EMS space, the driver will be production diversion out of China by non-China companies in reaction to US’ tariff.
Another stock that I find particularly interesting is Guan Chong Bhd. Though not well talked about, GCB is the fourthlargest cocoa grinder in the world. The dynamics of the cocoa supply-demand and the limited grinding capacity is very beneficial to the group’s earnings going forward.
Wai Ken: Investors seeking a high-growth sector with compelling long-term potential should look to Malaysia’s DC sector. The country is rapidly positioning itself as a strategic hub for digital infrastructure, driven by a confluence of government support, technological innovation, and global investment trends.
In the last two years, Malaysia has attracted RM99bil in DC investments, with another RM149bil in the pipeline.
The market is experiencing remarkable expansion, with DC supply in South-East Asia growing at a stunning 70% compound annual growth rate between 2018 and 2023.
Chue: We are looking at sectors such as technology, manufacturing and financial services, which are expected to be key drivers of the Malaysian economy in the coming year.
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