KUALA LUMPUR, Malaysia – Malaysia’s stock market is making a steady comeback as billions of dollars are poured into an exchange that was once rated as one of the worst-performing markets in the region.
Bursa Malaysia’s benchmark index has risen 17% in the past year, boosted by Malaysia’s strong post-pandemic economic growth and a surge in overseas investment by US tech giants.
The Bursa operator said investors opened 289,000 new trading accounts in the first seven months of 2024, almost double the number of accounts opened in all of 2023.
“The market appears to be coming out of a ‘lost decade’ where it was previously undervalued with little upside,” Stephen Yong, a certified financial planner at Wealth Vantage Advisory, told Al Jazeera. he said.
Yong, who has invested in the local stock market for many years, said there was “huge room” for growth and that many companies had been undervalued for a decade.
“The outlook is bright as investors are increasingly inflowing into the Asia-Pacific region, including Malaysia, and the economy is entering a recovery phase,” he said.
Over the past decade, political turmoil and lack of economic competitiveness were seen as a drag on the Malaysian stock market.
In the 2010s, Bursa’s Kuala Lumpur Composite Index (KLCI), which consists of the top 30 companies by market capitalization, hovered between 1,500 and 1,900 points.
In 2018, a rapid change in prime ministers, the aftermath of the 1MDB financial scandal, and the COVID-19 pandemic eroded investor confidence, sending the market into a multi-year downward spiral.
A 2019 Bloomberg article called Bursa “the world’s worst major stock market” after it suffered a 14% decline in one year.
Drivers wearing face masks pass by the Twin Towers on the first day of the third movement control order in Kuala Lumpur, Malaysia, May 7, 2021. (Vincent Tian/AP)
Ignatius Luke Junior Tan, who has been an investment banker for more than 40 years, said the Malaysian market was effectively “dying” until recently.
“For many years, it was neither here nor there…many people in Malaysia did not believe that the stock market was a place to make money,” Tan told Al Jazeera.
Tan said Malaysia, which was touted as an emerging tiger economy in the 1990s, began to lose momentum after the 1997-98 Asian financial crisis and was outpaced by neighboring countries such as Singapore.
“The stock market reflects the economy, and since 2005, our economy was not set up for growth. It was just rolling along,” Ms Tan said.
In a scathing commentary in December, Tong Koi Ong, owner of business newspaper Edge, said that KLCI had generated an annual return of about 1% over the past 10 years, which was lower than the typical return on term deposits. He pointed out that
But this year, the market has seen strong signs of growth, with the economy showing solid signs of growth, and US tech giants such as Nvidia, Google and Microsoft announcing billions of dollars of investment in Malaysia to expand their cloud and AI capabilities. Sentiment has begun to change.
A report released in July by information firm DC Byte named the southern Malaysian state of Johor, which borders Singapore, as Southeast Asia’s fastest-growing data center market with a total capacity 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, a 13% year-on-year increase, with more than half of it coming from foreign funds.
Malaysia’s central bank announced in August that Malaysia’s gross domestic product (GDP) will grow by 5.9% in the second quarter of 2024, the fastest growth rate in Southeast Asia apart from Vietnam and the Philippines.
Foreign investors made net purchases of Malaysian stocks totaling 1.5 billion ringgit ($34 million) in the week ending Aug. 30, the biggest net purchase since March 2016, according to MIDF Research.
IPOs are on the rise
Initial public offerings (IPOs) are also on the rise.
The exchange registered 34 IPOs in the first nine months of this year, compared to 31 in all of 2023.
This includes the market debut of 99 Speed Mart, which raised 2.36 billion ringgit ($542.8 million) in the country’s biggest listing in seven years.
Malaysia’s Bursa, worth nearly 2 trillion ringgit ($430 billion), still dwarfs its peers in regions such as Tokyo, Seoul, Mumbai, Singapore, Tokyo, Hong Kong and Shanghai.
But the company’s performance over the past year has been on par with much larger rivals.
Financial audit firm Deloitte said in a July report that Malaysia’s IPO market led Southeast Asia in the first half of this year, raising about $450 million.
Bursa’s market capitalization reached 2 trillion ringgit ($460 million) for the first time in May, when the KLCI topped the 1,600 ringgit mark for the first time in two years, and has remained close to that level ever since.
“The strong performance of the Malaysian stock market is supported by several macroeconomic factors as well as stronger economic fundamentals of the Malaysian economy,” a Bursa spokesperson told Al Jazeera.
“Analysts expect further growth towards the end of the year, driven by driving factors such as the Fed rate cut, continued foreign direct investment (FDI) momentum, earnings recovery, ringgit strength and positive news flow such as infrastructure project awards. I agree that there is room for growth.”
Remige, who has 40 years of experience in securities, called the strong performance of the local market a “welcome change” but advised potential investors to exercise caution.
“People who are paying attention to the market now may want to jump on the bandwagon,” Remijeh told Al Jazeera, speaking on condition of anonymity.
“We don’t know when foreigners will exit the market… They reduce their positions and exit the market as soon as they find opportunities elsewhere.”
Malaysian Prime Minister Anwar Ibrahim holds a press conference with German Chancellor Olaf Scholz in Berlin, Germany, March 11, 2024 (Liisa Johansen/Reuters)
He said that while the interest of US high-tech companies in Malaysia is welcomed, political stability plays an important role in the current economic situation.
Malaysian Prime Minister Anwar Ibrahim’s approval rating has fallen from a high of 68% after the November 2022 election, but he has maintained a higher approval rating than his three predecessors.
Despite running a government that includes former political opponents, he has faced no serious public challenges to his rule.
Still, there are potential risks to the relatively rosy economic picture, including “a sharp slowdown in global growth, increased volatility in global financial markets, or spillovers into Malaysia’s highly open economy.” supply chain disruptions,” Ya Kim Leng, an economist at Sunway University, told Al. Jazeera.
Eza Ezamy, managing director of business finance intermediary Laughing Tree, said he was optimistic about the trajectory of the stock market.
“I think this momentum in the stock market will continue in the coming weeks and months as long as Malaysia maintains its stability and operating margins,” Ezzamy told Al Jazeera, referring to Bank Negara Malaysia’s benchmark overnight policy rate. ” he said. interest rate.
“If Malaysia can maintain its operating margins…as long as it maintains its FDI and GDP numbers and as long as inflation remains very stable, I can’t think of anything but going up (for the stock market).”
