Maybank IB said Malaysia is seeing an investment upcycle wave with non-trade growth engines.
PETALING JAYA: Economists are maintaining the general opinion that Malaysia could begin 2025 on a cautious note, casting one eye on the second inauguration of billionaire businessman Donald Trump as US President and the effect his administration will have on domestic growth.
Maybank Investment Bank (Maybank IB) Research said navigating “Trump 2.0” would be a task this year and although Asean will likely not be a priority or a direct target, Malaysia could catch some attention as it has been a beneficiary of trade diversion.
In a report released yesterday, it said domestically, Malaysia is seeing an investment upcycle wave with non-trade growth engines including tourism, data centres and Asean economic integration as growth supports.
In a nutshell, the research unit observed that Malaysia’s third investment upcycle is on-going as sustained investments are feeding into rising actual investments.
“Income-boosting measures unveiled in Budget 2025 will uplift consumer spending, while we expect Bank Negara to keep the overnight policy rate unchanged in 2025.
“Domestically, all eyes will be on the Johor-Singapore Special Economic Zone, petrol subsidy rationalisation, 13th Malaysia Plan, the National Investment Incentive Framework and the Sabah state elections,” it said.
Perhaps not unexpectedly, Maybank IB Research predicted that downside to growth could arise from external uncertainties, in particular the aforementioned Trump 2.0 effect which is a major wildcard for the economic outlook from potential US trade policies and tariff measures.
The other areas of interest for the research outfit are domestic secular plays, as it sees positive trends to benefit banks, consumer and tourism.
Other areas include state-driven activities, especially in Johor, Sarawak and Penang where sustained investment action could be seen, as it also forecast developments in Sabah, Kedah and Perlis in energy and electric vehicles.
The research house also cited investment realisation, where positive effects from technology, construction and industrial properties spread to second order beneficiaries such as consumer, retail and offices; and corporate restructuring with several government-linked companies.
Notably, Maybank IB Research is projecting the FBM KLCI to touch 1,740 points by year-end, mainly to be led by the banking sector, while looking at the Malaysian economy to moderate to a growth of 4.9%, compared to the 5.2% it predicted for 2024.
Meanwhile, Kenanga Research believes that Malaysia is less exposed in trade imbalances, premised on the suspicion that Trump may use tariffs as a bargaining chip, more than a concrete policy.
The securities firm views the move as a step to alleviate trade imbalances and the urgency for Trump to close trade “loopholes”, as seen in the United States stance towards Mexico and Canada.
“Looking at trade deficits between the United States and other countries, Malaysia is also more insulated among Asean countries, while Vietnam would be more exposed.
“It would be fiscal and trade policy that could separate the winners and losers for Trump’s second presidential stint,” it said.
Summarily, Kenanga Research added that the strength of Malaysia’s position within the region still justifies a top-down approach, as it emphasised that digitalisation and energy-related matters will be key.
“Most of the limelight (on Malaysia) could come from warmer ties with Singapore, given the imminent launch of the Special Economic Zone and its details.
“We believe that the outlook of the ringgit would stabilise from here and would end 2025 at 4.45, helping draw attention back to the Malaysian market,” it said.
Kenanga Research is slightly more upbeat than Maybank IB Research pertaining to the FBM KLCI, as it is placing a 1,840 year-end target for the local premier index, while reiterating its strong sentiment on the utilities, technology, gloves and renewable energy industries.
“Some secular growth sectors are awaiting clarity. We believe as well that while the healthcare sector has structural tailwinds, for now it may be exposed to some overhang, particularly stemming from the diagnosis-related group payment system,” it commented.
Among the research house’s top picks for 2025 are Gamuda Bhd
, Tenaga Nasional Bhd, Malayan Banking Bhd and MR DIY Group (M) Bhd, before noting that amid uncertainty, investors may gravitate towards earnings and outlook visibility.
