The Securities Commission Malaysia forecasts that the capital market in 2025 will be influenced by financial uncertainties and geopolitical risks. Key challenges include disruptions in global supply chains and policy risks stemming from the new US administration. The Malaysian equity market, while resilient, faces concentration and liquidity risks, which could hinder its attractiveness to investors and inclusion in global indices.
The Securities Commission Malaysia (SC) has indicated that the Malaysian capital market will continue to face significant influences from various risk factors in 2025, particularly uncertainties in financial conditions. The ongoing escalation of geopolitical conflicts poses challenges for global businesses, disrupting vital transportation routes and threatening global supply chains, commodity markets, and food security, as highlighted in the SC’s Capital Market Stability Review 2024.
Additionally, the new administration in the United States is expected to increase foreign policy risks, imposing tariff, investment restrictions, sanctions, and industrial policies designed to safeguard supply chains. This strategic competition will inject further geopolitical and financial risk into international trade and investment environments.
The SC pointed out that weaker economic growth in China, along with potential US trade restrictions, could adversely impact global trade and the commodity market. It also anticipates that policy rates in developed markets will remain elevated for an extended period, although divergently between the United States and Europe.
The volatility of the geopolitical landscape may trigger economic fragmentation, ultimately affecting the domestic capital market. This could prompt global investors to seek safe-haven assets, likely resulting in increased market volatility. Consequently, more frequent sentiment-driven fluctuations in the market are expected, reflecting the interconnected nature of global finance.
Despite facing numerous challenges in 2024, the Malaysian equity market has shown resilience amid events such as the August panic selloff, interest rate alterations by the US Federal Reserve, and the results of the US presidential election. However, trading activity remains predominantly centered on local institutional investors, leading to reduced diversity which may result in crowding and overreactions in trading behavior.
The SC noted that Bursa Malaysia’s market capitalization is heavily weighted towards FBM KLCI counters. This concentration raises concerns about long-term market depth, liquidity risks, and diminishes the attractiveness of the Malaysian equity market for value investors, which may hinder its inclusion in global indices.
The SC’s analysis reveals that Malaysia’s capital market in 2025 will be shaped by ongoing geopolitical tensions, financial uncertainties, and the economic performance of major global players, notably the United States and China. The reliance on local institutional investors presents risks related to market behavior and volatility, ultimately impacting the market’s overall attractiveness and global standing.
Original Source: www.bernama.com
