Uncertainty, Geopolitical Risks To Shape Malaysia’s Capital Market In 2025 – SC

KUALA LUMPUR, March 20 (Bernama) -- The Securities Commission Malaysia (SC) said the Malaysian capital market in 2025 will remain influenced by key risk factors, including uncertainties in financial conditions.

The SC noted that escalating geopolitical conflicts are testing the resilience of global businesses, as the intensity and duration of these conflicts continue to disrupt key global transportation routes.

“This, in turn, threatens global supply chains, the commodity market, and food security,” the SC said in its Capital Market Stability Review 2024 released today.

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Additionally, the SC said the new United States (US) administration is set to heighten foreign policy risks for international businesses.

Tariff, investment restrictions, sanctions and industrial policies will scale up to compete with geopolitical rivals, secure strategic supply chains and cultivate critical sectors. Thus, injecting geopolitical and financial risk into trade and investment, it said.

On the same note, the SC said the weaker economic growth in China, coupled with the highly likely forthcoming trade restrictions by the US, could have adverse international spillovers via global trade and commodity markets.

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“Policy rates in the developed market would likely remain higher for longer, albeit with divergence between the US and Europe,” it said.

SC said the geopolitical scene remains volatile. Any heightening of geopolitical conflicts could lead to economic fragmentation which could spill over into domestic capital market, driving global investors to safe haven assets and potentially increasing volatility in the market.

More frequent occurrences of market sentiment driven volatilities are expected, given the interconnectedness of global markets.

The Malaysian equity market continued to be resilient throughout 2024 despite global and local events such as the August panic selldown, interest rate cuts by the US Federal Reserve and outcome of the US presidential election.

The SC said trading in the Malaysian equity market remains concentrated with local institutional investors. Reduced investor diversity may result in crowded trades and overreactions as investors could have similar trading behaviour.

“Bursa Malaysia’s market capitalisation continues to concentrate on FBM KLCI counters, leading to long-term market depth and liquidity risks.

“This concentration impacts the attractiveness of the Malaysian equity market particularly for value investors and affects its eligibility for inclusion in global indices,” it said.

-- BERNAMA