The Malaysian capital market in 2025 faces risks from geopolitical tensions and financial uncertainties. Key factors include potential U.S. sanctions impacting global trade and the concentration of investor activity in local markets. Resilience has been noted, but challenges regarding liquidity and market attractiveness persist.
The Securities Commission Malaysia (SC) indicated that the Malaysian capital market will be shaped by significant risk factors in 2025. Key influences include uncertainties in financial conditions and escalating geopolitical conflicts that disrupt vital global transport routes, impacting supply chains, commodity markets, and food security.
The SC points out that the new U.S. administration’s foreign policy could escalate risks for international businesses through tariffs, sanctions, and investment restrictions. These policies might inject geopolitical financial risks, affecting trade and investment dynamics.
Additionally, weakened economic growth in China and anticipated U.S. trade restrictions could lead to adverse effects on global trade and commodity markets. Higher policy rates are expected to persist in developed markets, particularly in the U.S. and Europe.
The geopolitical landscape remains unpredictable, with possible conflicts leading to economic fragmentation that could disrupt Malaysia’s capital market. This volatility may drive global investors towards safe haven assets, increasing market fluctuations.
Despite various global and local challenges in 2024, the Malaysian equity market has shown resilience. Factors such as market concentration among local institutional investors could lead to crowded trades and overreactions, impacting market dynamics.
The concentration of Bursa Malaysia’s capitalisation in FBM KLCI counters poses long-term liquidity risks, diminishing the market’s appeal to value investors and its suitability for inclusion in global indices.
The Malaysian capital market is expected to navigate a complex landscape influenced by geopolitical tensions, U.S. foreign policies, and China’s economic performance. The concentration of trading among local investors raises concerns regarding market depth and liquidity, which could challenge the market’s global competitiveness. Overall, stakeholders should prepare for potential volatility as global conditions evolve.
Original Source: www.bernama.com
