Kuala Lumpur, Malaysia – Malaysia’s stock market is experiencing a steady resurgence as billions of dollars pour into exchanges that were once the region’s worst-performing exchanges.
Bursa Malaysia’s benchmark index has risen 17% over the past year, helped by Malaysia’s strong post-pandemic economic growth and a surge in foreign investment from US tech giants.
Investors opened 289,000 new trading accounts in the first seven months of 2024, nearly double the number opened during all of 2023, according to the Bursa operator.
“The market appears to be emerging from a ‘lost decade’ in which it previously had little upside and was undervalued,” Stephen Yong, a chartered financial planner at Wealth Vantage Advisory, told Al Jazeera.
Yong, who has long invested in the domestic stock market, said there was room for growth and many companies had been undervalued over the past decade.
“The outlook is positive as we enter the recovery phase with more investor funds flowing into the Asia-Pacific region, including Malaysia,” he said.
Over the past decade, political turmoil and lack of economic competitiveness have been seen as obstacles to the Malaysian stock market.
In the 2010s, Bursa’s Kuala Lumpur Composite Index (KLCI), comprised of the top 30 companies by market capitalization, hovered between 1,500 and 1,900 points.
The market has been in decline for several years in 2018 as investor confidence was hit by a sharp change of prime minister, the fallout from the 1MDB financial scandal and the COVID-19 pandemic.
A 2019 Bloomberg article called Bursa “the world’s worst major stock market” after suffering a 14% slump in a year.
Ignatius Luke Jr Tan, who has been an investment banker for more than 40 years, said the Malaysian market was virtually “moribund” until recently.
“It’s been neither here nor there for years. “Many people in Malaysia did not believe that the stock market was a place to make money.” Tan told Al Jazeera.
Malaysia, which was touted as an emerging tiger economy in the 1990s, began to lose steam after the Asian financial crisis of 1997-98 and began to lose pace to neighbors such as Singapore, Tan said.
“The stock market reflects the economy. And after 2005, our economy was not ready for growth. I was just rolling around,” Tan said.
Tong Kooi Ong, owner of business newspaper The Edge, pointed out in a scathing comment last December that KLCI had returned about 1% per annum over the past decade, which was lower than the typical fixed deposit return.
But market sentiment is starting to change this year as the economy shows signs of strong growth and US tech giants including Nvidia, Google and Microsoft announce billions of dollars of investments in Malaysia to expand their cloud and AI capabilities.
In a report released in July by information company DC Byte, the southern Malaysian state of Johor, bordering Singapore, was selected as the fastest-growing data center market in Southeast Asia, with a total supply of more than 1.6 gigawatts.
Malaysia recorded 83.7 billion ringgit ($19.3 billion) in approved investments in the first quarter of this year, up 13% from the previous year, more than half of which came from foreign sources.
Last August, Malaysia’s central bank announced that gross domestic product (GDP) grew by 5.9% in the second quarter of 2024, the largest growth in Southeast Asia outside of Vietnam and the Philippines.
Foreign investors net bought a total of 1.5 billion ringgit ($34 million) of Malaysian stocks in the week ending August 30, the largest net purchases since March 2016, according to MIDF Research.
IPOs are on the rise
Initial public offerings (IPOs) also increased.
The exchange registered 34 IPOs in the first nine months of this year, compared to 31 for all of 2023.
This included the market debut of 99 Speed Mart, which raised 2.36 billion ringgit ($542.8 million) in the country’s largest listing in seven years.
At nearly 2 trillion ringgit ($430 billion), Bursa Malaysia is still dwarfed by regional peers such as Tokyo, Seoul, Mumbai, Singapore, Tokyo, Hong Kong and Shanghai.
But its performance over the past year has put it in a unique position among much larger competitors.
Malaysia’s IPO market led Southeast Asia by raising about $450 million in the first half of the year, financial audit firm Deloitte said in a July report.
Bursa first hit a market capitalization of 2 trillion ringgit ($460 million) in May, when the KLCI broke the 1,600 mark for the first time in two years, and has remained near that level since.
“The positive performance of the Malaysian stock market is supported by the strong economic fundamentals of the Malaysian economy and several macroeconomic factors,” a Bursa spokesperson told Al Jazeera.
“Analysts say there is room for further growth through the end of the year, driven by catalysts including interest rate cuts by the Federal Reserve, continued foreign direct investment (FDI) momentum, earnings recovery, ringgit strength and positive news flow from infrastructure project wins.”
While calling the domestic market’s solid performance a “welcome change”, Han Lemisier, who has 40 years of experience in the securities sector, advised potential investors to exercise caution.
“People watching the markets right now may be tempted to jump on the bandwagon,” Lemisier told Al Jazeera on condition of anonymity.
“You never know when foreigners will pull out of the market… They quickly reduce their positions and exit the market as they find opportunities elsewhere.”
Lemisier said that while interest from US technology companies in Malaysia was welcome, political stability played an important role in the current state of the economy.
Malaysian Prime Minister Anwar Ibrahim’s approval rating has fallen from a high of 68% since he was elected in November 2022, but he has outlasted his three predecessors.
Despite running a government in which his former political rivals participate, he has faced no serious public challenges to his rule.
Nonetheless, Sunway University economist Ye Kim Leng said: “The economy remains relatively optimistic, with a sharp slowdown in the global economy, increased volatility in global financial markets and supply chain disruptions impacting the highly open Malaysian economy. “There is potential danger in the situation,” he said. Go to sleep.
Eza Ezamie, managing director of business finance matchmaker Laughing Tree, said he was optimistic about the trajectory of the stock market.
“As long as Malaysia maintains consistency and OPR, I believe this momentum in the stock market will continue in the coming weeks and months,” Ezami told Al Jazeera, referring to Malaysia’s central bank’s benchmark overnight interest rate. said. interest rate.
“If Malaysia maintains its OPR… if it maintains its FDI and GDP numbers and inflation is very stable, I don’t see anything but rising for the stock market.”
