PETALING JAYA: Malaysia is benefitting from a global trend which focuses on switching money from expensive US stocks to much cheaper stocks which are found in developing-country markets.
Hong Kong billionaire and chairman of family office Cheah Capital Datuk Seri Cheah Cheng Hye said this trend is just beginning, and with the United States stock market constituting about 65% of global market capitalisation, this “rebalancing” trend is likely to continue.
“Note the American economy is about a quarter of the global economy but the American stock market is almost two-thirds of the world total, creating what some see as a risky imbalance,” he told StarBiz.
Going by this, the Penang-born Cheah said he expected current foreign fund interest in the local mart to continue.
According to a note by UOB, Malaysia recorded RM2bil in foreign portfolio inflows in January, doubling last December’s RM1bil, marking the fourth consecutive month of net inflows.
“Foreign investors increased holdings of both debt securities and equities, supported by solid domestic fundamentals and a firmer ringgit amid persistent external uncertainties,” the research house told clients in the note.
It said it expected capital flows into emerging markets, including Malaysia, to remain uneven and selective, supported by solid domestic fundamentals, expectations of continued Federal Reserve easing, and the ongoing artificial intelligence (AI) investment cycle.
Meanwhile Cheah said not only do stocks in Malaysia and other middle income countries offer much cheaper valuations, their economies are also generally growing significantly faster than America.
“Malaysian stocks and also bonds have the added attraction of a strengthening currency.
“The drawback is limited liquidity in Malaysia, which has long held back the development of the capital market in the country, meaning even if foreigners want to buy, there are practical limits to how much they can buy,” Cheah said.
He noted so far this year, the Malaysian stock market has gained 4.5% compared to a 1.4% gain by the US’ S&P 500 Index.
“American stocks trade at a price earnings ratio of about 28 times earnings which is high when compared with Malaysian stocks trading at an average of 16.5 times earnings.
“All over the world, the majority of stock markets are at significantly cheaper valuations than those in New York, where valuations are stretched because the United States sucked in capital from everywhere for many years and it is only now that the trend is reversing,” he said.
“At the same time, the US dollar is weakening, which further weakens New York’s attraction to global investors.
“Malaysia’s relatively stronger performance should continue,” Cheah added.
Areca Capital chief executive officer and fund manager Danny Wong said he believed there are factors attracting foreign interest to stay longer term here, driven by strengthened economic fundamentals, and significant foreign direct investment inflows, particularly in the technology and data centre sectors.
“While foreign shareholding hovered around 19% to 20% in late 2025, a shift towards strategic longer term holding seems sustainable moving forward,” Wong said.
He noted that year-to-date, both local and foreign institutions were net buyers, with retailers mostly selling off their holdings.
Rakuten Trade head of equity sales Vincent Lau said he also believed the current inflow of foreign money can be sustained, especially from a low base point of view, after a near record RM22bil outflow last year.
“This will be supported by improved economic fundamentals such as the the ringgit’s strength and stronger gross domestic product numbers,” said Lau.
In its note, UOB noted that Bank Negara Malaysia’s latest foreign reserves increased, extending the longest monthly accumulation streak since 2017.
It is sufficient to finance 4.8 months of imports of goods and services and is 0.9 times short‑term external debt, it said.
UOB said foreign ownership of Malaysian equities jumped to an eight-month high of 19.2% of total market capitalisation in January from 19% in December.
It said portfolio reallocation and diversification will likely dominate investor behaviour through the year amid elevated repricing risks, persistent market volatility, and concerns over AI-related valuations.
“Geopolitical tensions and renewed tariff risks are further accelerating diversification across asset classes.”
UOB said collectively, these factors may continue to provide near‑term support to the ringgit, reinforcing the structural recovery that started in 2025 and marking what appears to be the third major phase since the currency was unpegged.
Its latest US dollar to ringgit forecasts stand at 3.90 by mid-2026 and 3.85 by end of this year.
