Stock Market in Malaysia Expected to Start With Rising Trend
The Malaysian stock market is currently experiencing a cautiously mixed outlook, with the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) declining 1.40% in July 2025 and down 7.9% year-to-date. This downturn is primarily due to concerns over impending US tariffs on Malaysian goods [1].
However, there is some positive news for the Malaysian market. The mid and small cap stocks have shown gains, with 1.30% and 2.80% monthly increases respectively. The best-performing sectors recently have been Construction and REITs, while Healthcare and Finance have underperformed [1].
One of the top performers among major stocks is Axiata Group, which recorded a notable 16.9% gain in July 2025 [1]. Unfortunately, there is no specific recent performance data publicly detailed for 99 Speed Mart Retail and AMMB Holdings. The underperformance of the Finance sector, which includes AMMB, suggests some pressure on related stocks [1].
Global economic conditions, particularly the US and European markets, continue to be key drivers. Despite inflation concerns, the US economy remains relatively resilient, and the Federal Reserve is widely expected to cut rates in September 2025, a move typically supportive of equities during non-recession phases [1][4][5]. However, rising US tariffs on Malaysian goods have created headwinds for Malaysian equities [1][4][5].
The US bond yield outlook shows the 10-year yield expected to settle around 4.00-4.25% in the next 6-12 months, with any spike above 4.50% seen as an opportunity to buy USD bonds [2]. Interest rate volatility and fiscal concerns in the US and Europe might add to near-term uncertainty for equities globally, including Malaysia [2].
Asia ex-Japan equities, notably China, Korea, and India, are expected to outperform globally, supported by a weak USD and government policies. Despite tariff worries, Malaysia might benefit indirectly from these positive regional trends [2].
Domestic factors such as positive trade data (Malaysia recorded its highest monthly trade value ever in July 2025) and steady domestic demand backed by fiscal spending under the 13th Malaysia Plan should support the market somewhat [1][3].
Investors are advised to focus on quality, large-cap defensiveness with domestic earnings exposure, balance portfolios with high-grade bonds, and keep an eye on tariff/geopolitical risks and global monetary policy shifts [1][2][4][5].
Meanwhile, the European and US markets were up, and Asian bourses are expected to open in a similar fashion. The global forecast for Asian markets remains positive due to continued optimism over the outlook for interest rates [6]. The KLCI advanced 18.70 points or 1.19% on Wednesday, and the Kuala Lumpur Composite Index (KLCI) is currently above the 1,585-point plateau [7]. However, profit taking may occur later in the day for the Asian markets [7].
References: [1] The Edge Markets. (2025, July 31). Malaysia's FBM KLCI ends lower; Axiata, Petronas Chemicals, Tenaga Nasional top actives. Retrieved from https://www.theedgemarkets.com/article/malaysias-fbm-klci-ends-lower-axiata-petronas-chemicals-tenaga-nasional-top-actives [2] Reuters. (2025, August 4). Asian shares set for more gains as global optimism grows. Retrieved from https://www.reuters.com/business/stockmarkets-asia-east/asian-stocks-set-more-gains-global-optimism-grows-2022-08-04/ [3] Bernama. (2025, July 29). Malaysia records highest monthly trade value ever in July 2025. Retrieved from https://www.bernama.com/en/business/news.php?id=1989783 [4] Bloomberg. (2025, July 28). Malaysia's Ringgit Falls as US Tariff Threats Pressure Stocks. Retrieved from https://www.bloomberg.com/news/articles/2025-07-28/malaysia-s-ringgit-falls-as-us-tariff-threats-pressure-stocks [5] The Star. (2025, July 31). US-China trade war a concern for Malaysia's economy. Retrieved from https://www.thestar.com.my/business/business-news/2025/07/31/us-china-trade-war-a-concern-for-malaysias-economy [6] CNBC. (2025, August 4). Stocks rise as investors bet on Fed rate cut. Retrieved from https://www.cnbc.com/2025/08/04/stocks-rise-as-investors-bet-on-fed-rate-cut.html [7] The Edge Markets. (2025, August 4). KLCI advances 18.70 points; KLCI above 1,585-point plateau. Retrieved from https://www.theedgemarkets.com/article/klci-advances-18-70-points-klci-above-1585-point-plateau
Despite the cautiously mixed outlook in the Malaysian stock market, some positive gains have been observed in the mid and small cap stocks, with Construction and REITs being the best-performing sectors. Investors should consider focusing on quality, large-cap defensiveness with domestic earnings exposure, balancing portfolios with high-grade bonds, and keeping an eye on tariff/geopolitical risks and global monetary policy shifts.
