Malaysia Sheds Its ‘World’s Worst Stock Market’ Label As Market Rebounds

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Over the last ten years, a lack of economic competitiveness and political tensions have been obstacles to the performance of the Malaysian stock market.

The stock market in Malaysia is steadily recovering as billions of dollars flow into an exchange previously regarded as one of the worst performers.

Bursa Malaysia benchmark index has risen by up to 17 percent in the last year due to strong economic development in Malaysia post-pandemic and a rise in foreign investment by US tech companies.

Investors opened 289,000 new trading accounts in the first seven months of 2024, which is nearly twice as many as they did in the entire year 2023.

Some investors claim that there is significant space for growth, but many companies were undervalued for a decade. The market is recovering as more investors are investing in the Asia Pacific region, like Malaysia.

Over the last ten years, a lack of economic competitiveness and political tensions have been obstacles to the performance of the Malaysian stock market.

The top 30 firms by market capitalization include Bursa’s Kuala Lumpur Composite Index (KLCI), which fluctuated between 1,500 and 1,900 points during the 2010s.

The market experienced a prolonged downturn in 2018 due to rapid changes in prime ministers, the 1MDB financial crisis, and the COVID-19 pandemic that undermined investor trust.

The Bursa saw a 14 percent decline over a year, leading to being branded as the “world’s worst stock market.”

During the 1990s, Malaysia was an emerging economy. With the 1997–1998 Asian Financial Crisis, Malaysia started to lag behind its neighbors like Singapore.

During the last ten years, the KLCI generated an annual return of 1 percent, less than the usual return on a fixed deposit.

However, the market started to change when US tech giants like Nvidia, Google, and Microsoft announced billion-dollar investments in Malaysia to strengthen their cloud and AI capabilities.

The southern state of Malaysia, Johor, had the fastest-growing data center in Southeast Asia, with more than 1.6 gigawatts of available supply.

Over half of the approved investments in Malaysia during the first quarter of this year, with 83.7 billion ringgit ($19.3bn), up to a 13 percent increase over the same period last year.

Malaysia’s central bank announced that the GDP increased by 5.9 percent in the second quarter of 2024, a substantial expansion in Southeast Asia except for Vietnam and the Philippines.

According to MIDF Research, foreign investors made the highest net purchase spree since March 2016 when they purchased 1.50 billion ringgit ($34 million) worth of Malaysian stocks in the week ending August 30.

In the first nine months of this year, the exchange registered 34 IPOs, compared to 31 for 2023. Among them was 99 Speed Mart’s market debut, raising 2.36 billion ringgit ($542.8 million) in the highest listing in seven years.

Malaysia’s Bursa, valued at around 2 trillion ringgit ($430 billion), is far smaller than Tokyo, Seoul, Mumbai, Singapore, Hong Kong, and Shanghai.

The Bursa reached a record of 2 trillion ringgit ($460 million) in market capitalization for the first time in May when KLCI broke through the 1,600 barriers, and it has been close to that level ever since.

Analysts agree there is additional growth possibility at the year-end due to the Fed rate reduction, ongoing FDI momentum, and earnings recovery.

Although there is a strong performance in the local market, prospective investors cautioned that foreign investors will eventually leave the market when they discover opportunities elsewhere.

The prime minister of Malaysia, Anwar Ibrahim’s rating approval declined from 68% after his election in November 2022, but he managed to outlast his three predecessors.

Even though he led a cabinet with former political opponents, he has not encountered significant public opposition to his administration.

However, potential threats, like slower global growth, increased volatility in the world financial markets, or supply chain disruptions, would affect Malaysia’s highly open economy.

The managing director of the business financing matching service Laughing Tree, Eza Ezamie, is optimistic about the stock market. As long as Malaysia is consistent and maintains its benchmark interest rate, the Overnight Policy Rate (OPR), the momentum in the stock market will continue for the next few weeks or months.