Maybank IB's Suhaimi highlighted that improved performance by Corporate Malaysia will also support the investment upcycle.
KUALA LUMPUR: While acknowledging that the Malaysian economy and stock market would be swayed by external factors in 2025, Maybank Investment Bank Bhd (Maybank IB) has presented a cautiously optimistic outlook for the country’s growth and investment markets.
Its group chief economist Suhaimi Ilias predicted a 4.9% growth this year for Malaysia’s gross domestic product (GDP), a fractional ease-off from the 5.2% he projected for 2024.
Despite the modest revision, this still represents a respectable level of growth that would be spearheaded by strong domestic consumer spending and an ongoing investment upcycle.
He pointed out that the revision in civil salaries, on top of the minimum wage hike to RM1,700 from February, will enhance compensation to employees and boost spending.
However, what is more important is the increased rate of approved and realised investments.
“We are seeing a surge in the import of capital goods and based on the loan statistics from banks, we see this, coupled with a growth in banking system loans for the construction of industrial buildings and factories, as well as for the purchases of land,” said Suhaimi.
Citing numbers from the Malaysia Investment Development Authority, the Statistics Department and CEIC Data, he observed that approved private investments in Malaysia for the nine months ended Sept 30, 2024 (9M24), rose 10.9% to RM255bil, compared to the same period in the previous year.
At the same time, actual private investments for 9M24 surged 13.6% to RM242bil compared to 9M23.
Suhaimi highlighted that improved performance by Corporate Malaysia will also support the investment upcycle.
He added that both foreign and domestic investments in the country will be primarily driven by key themes, including financing needs derived from the National Energy Transition Roadmap (NETR), digitalisation and the Johor-Singapore Special Economic Zone (JS-SEZ).
“The NETR implies a total investment of RM1.2 trillion to RM1.3 trillion in 2023 to 2050, with Sarawak poised to be positioned as a renewable energy and green technology hub.
“At the same time, the National Semiconductor Strategy is aiming for RM500bil in investment in front-end and high value-added semiconductors within the next five to 10 years, with RM256bil digital investment, including for data centres and cloud infrastructure, having been approved since 2021 up to October 2024.”
Additionally, Suhaimi noted that the Iskandar Regional Development Authority is targeting RM223bil in investments to the JS-SEZ between 2024 and 2030.
This will be supported by infrastructure projects across the country, including the Penang Light Rail Transit system and the Johor Baru-Singapore Rapid Transit System.
Equally significant, Maybank IB equity research co-head Lim Sue Lin predicted the FBM KLCI to touch 1,740 by the end of 2025.
However, she noted that the market needs to brace for a volatile year, especially with billionaire real estate mogul Donald Trump returning to the White House this coming Monday.
“We cannot avoid the external front, but there are good deals within the Malaysian space, with opportunities for trade diversion,” she said, noting that non-trade growth engines are also booming, particularly the resurgence of the tourism industry and the opening of data centres.
Unsurprisingly, Lim named the banking industry as Maybank IB’s key “overweight” sector for the Malaysian equity market in 2025.
She also highlighted the consumer and defensive healthcare sectors, despite the latter facing challenges with the diagnosis-related group payment system.
Notably, she pointed out the increase in foreign participation in Malaysian equity trades over the past several years, which rose to 36% in 2024, up from 30% in 2023 and 27% in 2022.
“This shows the significant amount of foreign interest in the local stock market and in 2024, we see net inflows for the first three quarters of the year, but a reverse in the final quarter due the geopolitical concerns stemming from the US presidential election,” she said.
Lim outlined five key factors that could influence Malaysian equities this year: external disruptions, including the “China+1” effect; domestic consumer drivers; state-driven activities; investment realisation; and corporate restructuring of government-linked companies.
She also projected overall earnings growth of of 13% for 2024 and 10.7% for 2025 for companies within Maybank IB’s research universe.
Additionally, she estimated a 9.4% earnings growth for the FBM KLCI in both years.
Separately, Maybank IB’s head of foreign- exchange research Saktiandi Supaat believed the ringgit will continue to stay under pressure in 2025, in line with regional peers and due to its high trade exposure.
He observed that Trump’s tariff and tax policies could create more inflationary pressures in the United States, potentially keeping US Treasury yields elevated for longer and exerting pressure on emerging markets (EMs) and Asian currencies, including the ringgit.
“Moreover, potentially weaker growth and softer currencies can make EM assets such as equities unattractive, and more flows can instead be diverted into the US markets.
“In some sense, this represents a vicious cycle that can worsen,” said Saktiandi.
Despite acknowledging major challenges ahead for the local currency, he expected Bank Negara to keep its overnight policy rate at 3%, which could provide some stability.
He also noted that the government’s progress on fiscal consolidation path could also lend further support.
“These reasons, coupled with the fact that Malaysia is currently more politically stable, would mean that foreign investors are likely to be more optimistic about the country, leading to greater foreign investments, in addition to fast money inflows,” he said.
Outlining his ringgit outlook by quarters, Saktiandi projected the ringgit will stay at RM4.60 to the dollar in the first three months of 2025 (1Q25), before weakening slightly to 4.7 in 2Q25, and then strengthening to 4.55 and 4.45 against the greenback in 3Q25 and 4Q25, respectively .
Notably, he believed the ringgit will end 2025 at RM3.31 against the Singapore dollar.
