Malaysia’s stock market has become one of Asia’s star performers in 2024, attracting investors and making headlines across the region. The Kuala Lumpur Composite Index (KLCI) has risen by approximately 15% over the past year, marking a significant turnaround for a market that once struggled to keep pace with its regional peers. This resurgence has prompted cautious optimism, although analysts warn that future growth could be hampered by shifting geopolitical landscapes and economic uncertainties.
Dr. Lim Yuan Qing, a 43-year-old general practitioner from Melaka, is among the local investors who have benefitted from Malaysia’s bullish stock market. An experienced investor with a portfolio of stocks and ETFs spanning the U.S., Malaysia, Singapore, and China, Dr. Lim has witnessed significant gains this year. His Malaysian stocks alone have yielded six-figure returns in ringgit, a stark contrast to previous years where he considered a 4% annual return satisfactory.
“Buying stocks in Bursa Malaysia has generally been low-risk, low-return,” said Dr. Lim. “In previous years, I would be content with a 4% CAGR, but this year has been exceptional. My Malaysian stocks have grown by 15 to 20%, rivaling returns from the U.S. market.” As he plans for his retirement, Dr. Lim says he intends to “make hay while the sun shines,” hoping his investments will continue to yield impressive returns.
Dr. Lim’s experience reflects the broader enthusiasm among investors in Malaysia, where the KLCI has emerged as one of Southeast Asia’s top-performing indices, trailing only Taiwan and India across the Asian continent.
The KLCI’s strong performance has been fueled by the perceived stability of Malaysia’s current government, led by Prime Minister Anwar Ibrahim. His administration has implemented a series of initiatives to attract foreign investment, particularly in high-growth sectors such as semiconductors and data centers. These policies have added momentum to the stock market, with sectors like banking, commodities, and utilities showing particularly strong gains.
Licensed financial advisor Lieu Ching Foo of CC Advisory attributed the market’s success to a “positive story” presented by the Malaysian government. “Bursa Malaysia has benefited from favorable narratives surrounding economic growth and investment,” Lieu explained, noting how local investors are rallying behind the country’s economic prospects.
Between 2018 and 2022, Malaysia’s stock market suffered due to a series of political upheavals, seeing four different prime ministers and dealing with the repercussions of the 1Malaysia Development Berhad (1MDB) scandal. The 1MDB fallout severely impacted the Barisan Nasional coalition, which had governed Malaysia for over 60 years, triggering a period of uncertainty that saw the KLCI become one of the region’s underperformers. In 2019, Bloomberg even labeled Bursa Malaysia as the “world’s worst major stock market” as the KLCI fell by 14%.
The COVID-19 pandemic only added to the volatility, with the index hitting a low of 1,301 points in March 2020. The Sheraton Move in 2020, which saw the fall of the Pakatan Harapan government, led to further instability as multiple prime ministers cycled through office within a few years. Analysts have noted that this political turbulence played a major role in Malaysia’s stock market slump.
However, the KLCI has since climbed back up to around 1,609 points as of November 11, marking an impressive 23.7% increase. Mr. Ng Zhu Hann, CEO of Tradeview Capital in Kuala Lumpur, emphasized the market’s recent uptrend as a sign of recovery tied to Malaysia’s improved political stability under Anwar’s leadership. “Since 2020, the market has rebounded, making it one of Asia’s top performers over the past year,” Ng noted, though he acknowledged that the KLCI has yet to recover to its 2018 peak of 1,800 points.
Some of the best-performing stocks on Bursa Malaysia have been those in banking, property, and utilities. Total market capitalization crossed RM2 trillion (USD 454 million) for the first time in May, highlighting the stock exchange’s overall growth. Analysts point to a broad-based rally, particularly noting the performance of sectors like data centers and rubber manufacturing, both of which have seen renewed interest due to shifts in global demand and trade dynamics.
Sunway University economics professor Dr. Yeah Kim Leng, who also serves as an advisor to Malaysia’s finance ministry, commented on the government’s efforts to boost key industries. “The Madani government has successfully positioned Malaysia as a key player in the semiconductor and data center sectors, attracting investments from multinationals like Google, Amazon, Nvidia, and Microsoft,” Dr. Yeah said. These developments have fueled investor confidence in the Malaysian market.
The rubber glove industry, led by major players such as Top Glove and Hartalega, has also contributed to Malaysia’s stock market gains. Following the imposition of higher U.S. tariffs on Chinese-made gloves, Malaysian manufacturers have experienced a boost in market share, giving the sector a second wind after its pandemic-era boom.
Retail investors like Dr. Lim have embraced the gains in banking stocks, with institutions like Maybank and CIMB posting double-digit returns. “Bank stocks usually yield modest gains of 3-4%, but this year they’ve delivered much higher returns,” said Dr. Lim. Financial advisor Lieu emphasized the importance of the financial sector in propping up Bursa Malaysia, advising retail investors to approach with caution, as stock market volatility could result in a “rollercoaster” experience.
“Investors driven by FOMO (fear of missing out) may wish to allocate a small percentage of funds to Bursa Malaysia stocks, but it’s best not to go all-in,” Lieu advised, highlighting the inherent risks tied to an uncertain global economic landscape.
Despite the positive sentiment surrounding Malaysia’s stock market, analysts warn that the ongoing geopolitical tensions, particularly between the U.S. and China, could have repercussions for the country’s economy. Malaysia has been deepening ties with China, with Anwar Ibrahim exploring Malaysia’s entry into the BRICS group, signaling a potential pivot away from U.S.-centered economic alliances. While this approach could attract Chinese investments, it may also increase Malaysia’s vulnerability to fluctuations in China’s economy.
Mr. Lieu emphasized that Malaysia’s reliance on China could expose its stock market to risks tied to any potential downturn in the Chinese economy, particularly as the U.S. under the new administration of President-elect Donald Trump moves toward protectionist policies. “Malaysia’s economy is increasingly intertwined with China, and any disruptions to China’s economic growth could impact us,” Lieu cautioned.
Dr. Yeah echoed these sentiments, noting that Malaysia’s stock market performance is partially tied to the “Asian growth story,” which depends on a stable and growing Chinese economy. However, he also pointed out that Malaysia’s smaller market size may make it particularly sensitive to these external forces.
Recent developments in China’s economy have contributed to uncertainty among regional investors. In September, the Chinese government rolled out a series of stimulus measures to revitalize key sectors, prompting a rally in the CSI 300 and Hong Kong’s Hang Seng Index. Yet, just weeks later, both indices faltered when economic announcements failed to meet investor expectations.
Mr. Ng, CEO of Tradeview Capital, remains optimistic, suggesting that Malaysia’s market stands to benefit from China’s growth potential. “China’s stimulus policies are still being implemented, and while there may be delays, a stable Chinese economy bodes well for Malaysia,” Ng said, adding that China’s continued expansion could support broader regional growth.
Financial advisor Lieu believes that Malaysia’s stock market may continue to attract attention if the government can maintain stability and continue attracting high-value investments. He suggests that retail investors start with familiar brands such as minimart chain 99 Speed Mart, which recently made headlines with a successful IPO.
“It’s a business that’s accessible to local investors, with clear growth potential,” Lieu said, underscoring the importance of investing in companies with tangible local relevance. He also recommended diversifying investments and remaining cautious about any stock that might be heavily affected by external risks.
