Overview of Malaysia’s Market Outlook for 1H25

UOB Kay Hian’s latest report highlights a cautiously optimistic outlook for Malaysian equities in the first half of 2025. The market is expected to rely heavily on domestic-driven liquidity and investment themes such as Iskandar 2.0, data center rollouts, renewable energy initiatives, and blockchain-based opportunities. Despite external uncertainties, including high US treasury yields and global trade policy concerns, Malaysia’s favorable domestic policies, foreign direct investment (FDI) trends, and corporate earnings growth (FBMKLCI: 8.4%) are set to sustain positive momentum.

Key Themes and Investment Strategies

• Iskandar 2.0: Significant developments in this economic corridor are expected to drive growth for property developers and infrastructure companies.
• Data Center Rollouts: Opportunities in Johor and other regions continue to attract attention.
• Renewable Energy: Investments in solar and hydro power are pivotal to Malaysia’s Green Agenda.
• Blockchain Opportunities: Monetization potential is immense, with use cases in NationalID, WorldID, and Pan-Asian platforms like ZTrade and e-CNY.
• Wage Hikes and Domestic Consumption: Wage increases are expected to favor consumer discretionary sectors.

FBMKLCI Target for 2025

The FBMKLCI is projected to reach 1,800 by the end of 2025, representing a valuation of 15.3x earnings or -0.75 standard deviations (SD) to the historical mean price-to-earnings (PE) ratio. The current FBMKLCI stands at 1,629, reflecting significant room for growth as the year progresses.

Top Picks for 1H25: Detailed Company Analysis

Sector Ratings and Performance

UOB Kay Hian emphasizes an OVERWEIGHT stance on the building materials, construction, property, and technology sectors. These sectors are expected to deliver superior returns, driven by domestic catalysts and improving fundamentals. Meanwhile, a MARKET WEIGHT stance is maintained for other sectors such as banking, healthcare, and oil & gas.