Bursa Malaysia KLCI Index Soars to Three-Year Peak, What's Next?

Traders at Rakuten Trade Sdn Bhd said that the positive outlook is driven by private sector jobs such as data centers and the RM10 billion Mutiara light rail transit line in Penang, alongside major public infrastructure projects like mass rapid transit 3 and Pan Borneo projects.

Malacca Securities (MSSB) said that the FTSEBursaMalaysia KLCI closed higher due to the buying pressure of telecommunications and media stocks, as well as financial heavyweights, as market sentiment improved. The index also tracked the overnight gains in the United States as retail sales data there was stronger than expected.

Research Director Kenny Yee described the current uptrend in the Bursa Malaysia as a "warm-up" and said that a full-blown bull market has yet to materialize. " Of course, we have not entered a bull market yet. We are just warming up, and the increase in trading volume proves that," he said.

The research firm has a "buy" rating on the banking, construction, power and utilities, technology, and telecommunications sectors.

Amazon, Google, Microsoft, Nvidia and TikTok-parent ByteDance all plan or have announced data centre projects in Malaysia as they build out the computing power behind artificial intelligence products. So far this year, the daily trading volume on the Malaysian exchange has exceeded the 10-year average of 3.8 billion shares, reaching 4.6 billion shares. Since May, this average has increased to 5.6 billion shares per day. Kenny Yee is optimistic about trading volumes in the second half of the year, saying, "The average daily volume should continue to improve towards the end of this year, when there are more 'clawbacks' from government-linked investment companies (GLICs) from their overseas investments."

"I think Malaysia is definitely a sweet spot at the moment because we offer water, power and the connectivity is there," said Ernest Chew, Asean portfolio manager at BNP Paribas Asset Management in Kuala Lumpur, who has been buying Malaysian stocks.

Standard Chartered Bank's head of asset allocation and thematic strategy Audrey Goh Sze Chieh, said that due to expectations of relaxed US monetary policy and increased foreign investment interest, the Malaysian stock market is expected to rise by 12.3% in the second half of this year, to 1,633.54 points.

Currently, foreign participation in the local stock market is only 20%. Head of investment strategy and advisory Ng Shin Seong expects foreign investors to become more interested in the Malaysian market as a series of structural reforms unfold, including the rationalization of targeted subsidies and the overall planning of the new industry by 2030, among others.

Ng Shin Seong also pointed out that under the expectation that the US Federal Reserve will cut interest rates once or twice, Standard Chartered Bank will maintain its forecast for Malaysia's economic growth rate of 4.8% this year, which means that the interest rate differential between the US and Malaysia will narrow and the ringgit will strengthen slightly.