The SC forecasts that Malaysia’s capital market in 2025 will be shaped by financial uncertainties and geopolitical conflicts, impacting supply chains, trade, and investment. A new US administration may escalate foreign policy risks, while weakened Chinese economic growth could adversely affect global markets. Increased trading concentration among local investors may hinder market dynamics and attractiveness.
The Securities Commission Malaysia (SC) indicates that the Malaysian capital market in 2025 will be significantly impacted by financial uncertainties and escalating geopolitical risks. These factors, including ongoing geopolitical conflicts, threaten global supply chains, the commodity market, and food security, as outlined in the SC’s Capital Market Stability Review 2024.
The SC highlights that the new United States administration may intensify foreign policy risks through tariff hikes, investment restrictions, and sanctions, affecting international business dynamics. Such policies aim to compete against geopolitical adversaries and secure vital supply chains, thus injecting additional geopolitical and financial risks into trade and investment activities.
Moreover, the SC warns that sluggish economic growth in China, paired with anticipated trade restrictions from the US, could create negative international spillovers affecting global trade and commodities. They predict prolonged high policy rates in developed markets, despite potential divergence between US and European approaches.
The geopolitical landscape remains unstable, posing risks of economic fragmentation that may affect Malaysia’s domestic capital market. Heightened geopolitical tensions could drive global investors toward safer assets, potentially increasing volatility within the Malaysian market, which may suffer from more frequent market sentiment-driven fluctuations.
In 2024, the Malaysian equity market demonstrated resilience despite various external events, maintaining stability amid fluctuating global and local factors. However, the SC notes that trading is becoming increasingly concentrated among local institutional investors. This lack of diversity could lead to excessive trading similarities and crowded trades, which may hinder market attractiveness for value investors and impact its standing in global indices.
In conclusion, the Malaysian capital market is anticipated to grapple with significant uncertainty and geopolitical risks in 2025. The potential impact of international policy shifts and economic factors may create volatility and affect market stability. Furthermore, increased concentration among local institutional investors poses risks to trading dynamics and market diversity, ultimately affecting the overall appeal of the Malaysian equity market.
Original Source: www.bernama.com
