Stock market in Malaysia expected to arrest its downward trend on Thursday
The global market forecast for the Asian markets is currently exhibiting a cautiously optimistic tone, primarily due to easing inflation concerns. This optimism was further bolstered by President Donald Trump's recent statement that he is "not planning" on firing Federal Reserve Chair Jerome Powell, causing the major averages to move back to the upside.
In the Malaysian context, the Kuala Lumpur Composite Index (KLCI) has been displaying a mix of positive and negative trends. After a positive start in late June, driven by energy sector gains and improved sentiment following reduced geopolitical tensions, the index has experienced slight fluctuations. As of the latest closing, the KLCI stood at approximately 1,511.50 points, having dropped 13.90 points or 0.91% in the previous session.
The Utilities and Energy sectors have been strong performers within the Malaysian market, while the Healthcare and Finance sectors have underperformed. Foreign institutional investors have also been net sellers, with a year-to-date outflow of RM12.1 billion in equities as of June 2025.
The economic outlook for Malaysia is also marked by several trends and challenges. Economists predict a slowdown in GDP growth during the second half of 2025, with expectations of around 3.5% to 3.6% compared to 4.4% in the first half. Full-year growth projections range from 3.9% to 4.2%. Ongoing trade tensions, particularly with the U.S., and potential sector-specific tariffs pose significant risks, as does the implementation of Malaysia's expanded Sales and Service Tax (SST) and electricity tariff hikes.
Despite these challenges, Malaysia's strategic location, political stability, and skilled workforce present opportunities for investors. The "Malaysia MADANI" economy offers thematic investment prospects, focusing on sustainable and equitable development. However, investors face risks related to currency fluctuations, bureaucratic delays in project approvals, policy continuity uncertainties, and regional competition from ASEAN neighbors.
In terms of specific stocks, 99 Speed Mart Retail plummeted 3.48% on Wednesday, while Petronas Dagangan climbed 1.31%. Petronas Chemicals fell 0.62%, AMMB Holdings surrendered 2.72%, and Axiata rallied 2.00%.
The European markets were down, the U.S. bourses were up, and the Asian markets are expected to follow the latter's lead. Crude oil prices, as represented by West Texas Intermediate crude for August delivery, fell $0.14 to settle at $65.38 per barrel on Wednesday, marking the third consecutive day of drops.
In conclusion, while the KLCI has shown resilience with support from energy and utility sectors, the broader Malaysian market faces challenges from external trade uncertainties and domestic fiscal policies. The outlook for Malaysia's economy and stock market remains cautiously optimistic, with opportunities for long-term growth amidst these challenges.
In light of these conditions, investors in Malaysia's finance sector may consider diversifying their portfolios to capitalize on the stronger performance of the Utilities and Energy sectors. The cautiously optimistic global economic landscape, particularly in the stock-market, presents an opportunity for expanding businesses and long-term investments in the Malaysian market. However, it is crucial to be mindful of the risks associated with currency fluctuations, bureaucratic delays, policy continuity uncertainties, and regional competition when considering investment in this region.
