Analysts say construction corporations, energy suppliers and technology firms will profit most from foreign investment within the Southeast Asian country.
“I think Malaysia is definitely the sweet spot right now because we have water, electricity and connectivity,” said Ernest Chew, ASEAN portfolio manager at BNP Paribas Asset Management in Kuala Lumpur, who buys Malaysian stocks.
“Running a data center is nothing new in Malaysia… we just see that now [generative-]The AI boom, the data center boom, which is basically accelerating [foreign direct investment] …therefore we see minimal risk.”
Foreign direct investment is usually small, but last 12 months it totaled 188.4 billion ringgit ($40 billion), near a record $208.6 billion raised in 2021, in response to the Malaysian Investment Development Authority.
Of course, the inflow of foreign capital into equities has yet to materialize. HSBC’s evaluation shows a net outflow of $150 million from Malaysian equities between 2024 and June 26, and each Asia-focused and global emerging-market funds are underweight the country.
Investors are beginning to warm as much as Malaysia
But as these sectors drive momentum and boost liquidity – average day by day turnover is sort of twice as high as a 12 months ago – foreign investors have gotten increasingly confident concerning the market’s prospects.
“Investors are starting to warm up to Malaysia,” said Tushar Mohata, head of Malaysia equities research at Nomura. “We don’t think valuations are overheated right now, so we think this rally should continue.”
One measure of value is the price-to-earnings ratio, which for Malaysia’s KLCI is 15, compared with 21 for the S&P 500. The performance of sub-indices has been excellent, with the development index up 63 per cent 12 months to this point.
Earlier in July, JP Morgan raised its base goal for the benchmark index to 1,650 points. The index closed at 1,633.54 on Wednesday.
