Last updated on August 23, 2025
KUALA LUMPUR: Malaysian equities are trading below their historical average valuations, presenting upside potential despite ongoing foreign outflows and policy uncertainties, according to Hong Leong Investment Bank Bhd (HLIB).
HLIB noted that the FTSE Bursa Malaysia KLCI’s (FBM KLCI) 2026 valuation is under its five-year mean. This, coupled with a stronger ringgit and expectations of a US interest rate cut in September, could lend near-term support to the market.
“The recent cut in US–Malaysia tariffs to 19 per cent, the launch of the 13th Malaysia Plan, and easing US–China trade tensions — reinforced by a 90-day truce — create a constructive backdrop for the FBM KLCI,” it said in a note today.
On Thursday, the FBM KLCI retreated 5.6 points to 1,581.05, ending a seven-day winning run that had added 59.6 points, mirroring weaker regional sentiment.
HLIB said a clear break above 1,587 points, the May 15 high, would signal a breakout, opening the path towards the 1,600–1,615 resistance band.
“While a short-term pullback is possible after the August rally of 67.8 points, the near-term trend remains constructive,” it added.
Still, the research house cautioned about headwinds such as sustained foreign selling, subdued corporate earnings, and domestic policy risks.
So far this year, foreign investors have withdrawn RM14.61 billion from the local bourse — the largest annual outflow since the RM24.6 billion recorded during the 2020 pandemic. In contrast, local institutions have been net buyers of RM12.86 billion, with an additional RM1.76 billion from retail investors.
HLIB also pointed to a “tariff overhang” as Malaysia awaits clarity from the US on semiconductor export rules following President Donald Trump’s proposal for a 100 per cent levy on chips made outside the US.
Domestically, it warned that concerns over subsidy rationalisation and possible expansion of the sales and service tax could dampen consumer sentiment and cloud earnings visibility.
