The SC predicts that the Malaysian capital market in 2025 will be influenced by uncertainties, geopolitical conflicts, and a volatile financial landscape. The new US administration may heighten risks through tariffs and restrictions, while China’s economic slowdown could further impact global trade. The market remains concentrated among local institutional investors, presenting liquidity risks.
The Securities Commission Malaysia (SC) has projected that the Malaysian capital market in 2025 will be significantly shaped by various risk factors, particularly uncertainties in financial conditions. The SC emphasizes that escalating geopolitical conflicts are affecting the resilience of global businesses, disrupting vital global transportation routes that threaten supply chains, the commodity market, and food security.
Moreover, the SC anticipates that the new administration in the United States will increase foreign policy risks for international enterprises. Heightened tariffs, investment restrictions, and industrial policies may intensify competition among geopolitical rivals and secure strategic supply chains, thus injecting additional geopolitical and financial risk into trade and investment.
The SC further acknowledges that slowing economic growth in China, compounded by potential trade restrictions from the US, could have adverse effects on international trade and commodity markets. It is projected that policy rates in developed markets will remain elevated for an extended period, with notable differences between the US and European markets.
The geopolitical landscape exhibits volatility, and an escalation of conflicts could lead to economic fragmentation. This scenario may drive global investors towards safe haven assets, increasing market volatility. In light of these complexities, more frequent volatility influenced by market sentiment is anticipated due to the interconnected nature of global markets.
In 2024, the Malaysian equity market demonstrated resilience despite various global and local challenges, including an August sell-off, interest rate adjustments by the US Federal Reserve, and the US presidential election outcomes. However, the SC reported that trading remains dominated by local institutional investors, which could lead to crowded trades and possible overreactions in trading behavior due to a lack of diverse investor participation.
The SC also pointed out that Bursa Malaysia’s market capitalisation is heavily reliant on the FBM KLCI counters. This concentration poses long-term risks to market depth and liquidity, potentially diminishing the Malaysian equity market’s attractiveness to value investors and affecting its potential inclusion in global indices.
In conclusion, the Malaysian capital market is poised to face considerable pressures from geopolitical risks and uncertainties in financial conditions. The impact of foreign policy changes, economic fluctuations in China, and concentrated trading dynamics in the equity market may hinder its resilience. Continuous monitoring and diversification in trading practices will be critical for mitigating risks and enhancing the market’s overall stability and attractiveness to investors.
Original Source: www.bernama.com
