Malaysia’s stock market capitalisation hits record high of RM2 trillion

[KUALA LUMPUR] Malaysia’s stock market reached a milestone as it hit RM2 trillion (S$571.6 billion) in market capitalisation for the first time ever on Tuesday (May 7), driven by renewed interest from foreign funds on heavyweight counters.

On the same day, the benchmark index FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) breached the psychological barrier of 1,600 points for the first time in two years.

This upward momentum continued into Wednesday with a broad-based rally across the stock market. The FBM KLCI ended at 1,604.75, down 0.1 per cent, though it rose as much as 0.3 per cent to 1,610.25 earlier in the day – the highest since May 3, 2021.

Despite the dip, market activity was robust, with 5.4 billion shares valued at RM3.6 billion changing hands in the session.

Among the index constituents, key gainers on Wednesday were Sime Darby Plantation (3.1 per cent), YTL Corp (1.5 per cent), YTL Power (1.4 per cent) and Petronas Chemicals (1 per cent).

Among sectors, 10 out of 13 saw gains, with plantation leading (0.8 per cent), followed by healthcare (0.7 per cent) and technology (0.6 per cent). Across the broader market, losers slightly outnumbered gainers 571 to 568.

Mercury Securities said the rally has been fuelled by the return of foreign funds, as investors expect a dovish response from the Federal Reserve to the latest economic data.

Despite Wednesday’s dip, the FBM KLCI has climbed more than 10 per cent in the year-to-date period, making it the top-performing index in the Asean region so far this year. In Asia-Pacific, Japan’s Nikkei 225 outperformed the FBM KLCI, with a gain of 1.6 per cent.

Bloomberg-compiled data indicated that analysts predict the FBM KLCI could rise another 5 per cent over the next 12 months.

MIDF Research highlighted that support from local investors and the return of foreign funds in May have been key factors driving the recent market rally.

“Although there was a foreign fund net outflow of RM4.25 billion between March and April, we are sanguine on the prospect of foreign funds returning to the Malaysian market. This could be due to the anticipated US rate cuts and expectations of a stronger ringgit,” said MIDF.

In a report on Wednesday, Hong Leong Investment Bank analyst Ng Jun Sheng said despite the usual “sell in May” sentiment and ongoing earnings reports, the FBM KLCI could face increased volatility after surging 150 points so far this year.

“The rally could face formidable barriers at 1,620 points and 1,642 points, potentially triggering profit-taking activities around the key support levels of 1,581 and 1,565,” he added.

However, BCA Research senior emerging market strategist Rajeeb Pramanik is sceptical of the recent stock rally, pointing out that Malaysia’s broader macroeconomic conditions have not significantly improved.

Similarly, Christopher Leow, chief investment officer for equities at Asia Principal Asset Management, noted that investors require greater clarity on government policy, to reduce the high risk premiums currently affecting the market.