The Securities Commission Malaysia indicated that the capital market in 2025 will contend with uncertainties and geopolitical risks affecting financial conditions, supply chains, and investor behaviors. These factors are expected to foster market volatility and impact attractiveness for investors in Malaysia’s equity market.
According to the Securities Commission Malaysia (SC), the Malaysian capital market in 2025 will be shaped by various risk factors, including uncertainties in financial conditions. Escalating geopolitical conflicts are stressing the resilience of global enterprises, as these conflicts disrupt significant global transportation networks.
The SC emphasized that such disruptions jeopardize global supply chains, impact the commodity market, and threaten food security. Furthermore, the new administration in the United States is expected to intensify foreign policy risks for international businesses through measures such as tariffs and investment restrictions, which will inject geopolitical and financial risks into trade and investment.
China’s anticipated weaker economic growth and potential US trade restrictions may also have negative repercussions on global trade and commodity markets. The SC indicated that policy rates in developed markets are likely to remain elevated for an extended period, with some divergence between the US and Europe.
The geopolitical landscape is characterized by volatility, which could result in economic fragmentation affecting the domestic capital market. This situation may drive global investors towards safe haven assets, increasing market volatility and sentiment-driven fluctuations due to the interconnectedness of global markets.
Despite various disturbances in 2024, such as local sell-offs and interest rate adjustments by the US Federal Reserve, the Malaysian equity market has shown resilience. However, the SC pointed out that trading in this market is largely dominated by local institutional investors, which creates risks due to a lack of diversity in investor behavior.
The concentration of Bursa Malaysia’s market capitalization among FBM KLCI counters is raising concerns about long-term market depth and liquidity, consequently affecting the market’s attractiveness to value investors and its eligibility for inclusion in global indices.
In summary, the Malaysian capital market faces significant challenges ahead in 2025, driven by uncertainties in financial conditions and escalating geopolitical risks. These factors threaten supply chains, impact investor behavior, and could lead to increased market volatility. It is crucial for stakeholders to develop strategies to navigate these complexities and enhance market resilience, as concentrations in trading may deter broad-based investor interest.
Original Source: www.bernama.com
