The Securities Commission Malaysia (SC) foresees that financial uncertainties and escalating geopolitical conflicts will significantly influence the capital market in 2025, threatening economic stability and supply chains. The US foreign policy is expected to elevate risks, with potential repercussions on trade and investment. Despite recent resilience, concerns over market concentration and liquidity persist within the Malaysian equity market.
The Securities Commission Malaysia (SC) has asserted that key risk factors, including financial uncertainties, are expected to influence the Malaysian capital market in 2025. Escalating geopolitical conflicts pose significant challenges to global businesses, disrupting essential transportation routes and threatening global supply chains, commodity markets, and food security, as noted in their Capital Market Stability Review 2024.
Additionally, the SC foresees that the new administration in the United States will elevate foreign policy risks for international businesses. This will likely encompass higher tariffs, investment restrictions, and sanctions aimed at competing with geopolitical rivals and securing strategic supply chains, subsequently introducing additional geopolitical and financial risks into global trade and investment.
Furthermore, the SC highlighted that weaker economic growth in China and potential trade restrictions by the US could adversely affect international trade and commodity markets. The commission anticipates that policy rates in developed markets will remain elevated for an extended period, albeit with some divergence between the US and Europe.
The geopolitical landscape remains precarious, with heightened conflicts potentially resulting in economic fragmentation that could adversely impact the domestic capital market. Such volatility is expected to drive global investors towards safe haven assets, thus increasing market instability.
Despite the challenges posed by global events, the Malaysian equity market demonstrated resilience throughout 2024, managing to weather the August panic sell-down and interest rate adjustments by the US Federal Reserve. However, liquidity concerns persist due to a concentration of trading among local institutional investors, leading to homogeneous trading behavior and potential overreactions.
The concentration of Bursa Malaysia’s market capitalization on FBM KLCI counters raises concerns regarding long-term market depth and liquidity. Consequently, this limited diversity may impact the appeal of the Malaysian equity market for value investors and hinder its inclusion in global indices.
In conclusion, the Malaysian capital market in 2025 will likely be shaped by geopolitical tensions, economic uncertainties, and policy changes domestically and internationally. The resilience of the market amid global challenges, along with concerns over concentration and liquidity, highlights the complexities faced by investors. The SC’s analysis emphasizes the need for diversification to enhance market stability and attractiveness.
Original Source: www.bernama.com
