Malaysian Economy: Positive Momentum but Caution Advised

Malaysia enters 2025 with optimism following political stability and positive economic indicators from 2024. Key achievements include a stronger Ringgit, appreciating from 4.80 to 4.50 against the USD, and significant foreign direct investments (FDIs) totaling RM80 billion in areas like data centers, semiconductors, and green technology. The launch of the JSSEZ is expected to further attract investments and bolster economic growth.

Domestically, the construction sector is gaining momentum, with private projects and major government initiatives like the Penang MRT on the horizon. Analysts project the FBM KLCI index could test 1,730 in 2025 and reach 1,860 in 2026, supported by earnings growth.

Malaysian Economy Brief

However, risks remain. The US’s stubbornly high interest rates and potential volatility in Wall Street could disrupt global markets by 2H25. Investors are urged to remain cautious as headwinds from geopolitical uncertainties and economic challenges could lead to unforeseen obstacles ahead.

Local institutions are now leading fund flows in Malaysia, with RM10.3 billion net inflows in 2024, replacing the usual dominance of foreign investors. Domestic fund flows are expected to strengthen further, supporting the local stock market. Foreign flows remain unpredictable, influenced by geopolitical tensions, while retail investors saw a significant RM5.8 billion net outflow last year. However, strong economic growth and value in China, Hong Kong, and ASEAN markets are likely to attract foreign funds in the future.

Fund flows

Local institutions dominate Malaysia’s 2024 fund flows with RM10.3 billion net inflows, as foreign flows remain volatile amid geopolitical tensions. Strong economic growth in China, Hong Kong, and ASEAN may attract future foreign investments despite retail outflows.

Source: Rakuten Trade

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