Policy reforms promoted · Favored by foreign investors, Komo: Incentivizing Malaysian stocks to welcome the bull market

J.P. Morgan is optimistic that Malaysia is implementing policy reforms that will boost economic development, attract growing interest from foreign investors, and continue to drive the rise in Malaysian stocks.

At the beginning of July, Komo held the first J.P. Morgan Chase Malaysia Forum. After talking with 3 ministers from the Ministry of Finance, the Ministry of Transport, and the Ministry of Digital, and visiting a number of semiconductor factories in Penang, China's rating was raised from “reduced holdings” to “neutral” last week.

This world-renowned investment bank has also given the FTSE Composite Index a goal of reaching 1,650 this year, and believes that if the market continues to be bullish, reaching 1,700 points is not a dream.

In the full report released, Komo quoted Second Finance Minister Dato' Sri Amir Hancha's opinion, saying that Malaysia's political stability has enabled the government to implement policy reforms.

The report continued that Malaysia is also committed to implementing necessary reforms to promote economic development upstream in the value chain and reduce China's fiscal deficit.

“The gradual implementation of policy reforms has been well received. Foreign-approved investment increased by 24% year-on-year in the first quarter of this year, which already illustrates the situation.”

Amir Hancha also added that implementing targeted subsidies requires making difficult decisions, so the government must implement them in a pragmatic manner to ensure proper management of the inflationary impact of such implementation.

Furthermore, after meeting with Minister of Transportation Lu Zhaofu, the J.P. Morgan Chase analysis team learned that China intends to further enhance the capacity of transportation hubs by investing in airports, railway infrastructure, and seaports.

Among them, the East Coast Railway (ECRL), which is expected to be put into operation in 2027, will enhance rail freight connectivity and bring benefits to increasing port throughput.

According to reports, the Longxin High Speed Rail (HSR) will be led by the private sector, and the Malaysian Foundation may obtain projects in Malaysia. As for the MRT 3 (MRT 3) project, the government is also exploring different financing models.

Lu Zhaofu added that by cooperating with private developers to develop transport-oriented development projects, project costs may be recovered.

“The Rouxin Rapid Transit System (RTS) will be put into operation in early 2027. It is expected to shorten the end-to-end journey to about 20 minutes, which has already aroused interest in the Johor Bahru industrial market.”

As for today's hot data center sector, the analyst team said they are very picky about this field and prefer companies that provide infrastructure or support services.

However, the analysis team emphasized that Malaysia's speed of entry into the market for new data center construction and sufficient electricity and water supply make the country an attractive destination for data center investment.

In addition to this, Digital Minister Gobbin Star also pointed out that current policies are also beneficial to data center investment. For example, the Personal Data Protection Act 2010 and the 2024 Cybersecurity Act will support the implementation of technology-related investment growth.

“After visiting a number of electrical and electronic (E&E) companies in Penang with investors, we shared the same desire for NIMP 2030, which is to enhance the value chain.”

The analysis team emphasized that the local technology industry will continue to be positively affected by China's +1 supply chain migration strategy, improving worker skills and expanding the talent pool, and welcoming an influx of more front-end activities (IC design and fab investment).

At the same time, after getting in touch with the management of listed companies, Xiaoma also gave the following comments:

Gold's management anticipates that uncompleted orders will increase to RM30 billion to RM35 billion by the end of this year, while new orders likely to be received in the near future include the Penang Light Rail, the Sabah Upper Padas Hydropower Project, and the Australian Suburban Railway Link.

If the bid for a new data center project is successful, in addition to bringing potential room to increase the order target, the industrial building systems (IBS) business can also undertake main and core projects worth RM2 billion for the data center project.

At the same time, Gold is optimistic about overseas markets and aims to expand its business from the current state of New South Wales to other states in Australia, with the goal of doubling its construction revenue within the next 5 years.

Also, as Sarawak government spending increases, IJM will bid for the second phase of the Kuching Smart Rail (ART).

Westport Holdings will continue to benefit from the influx of foreign direct investment (FDI) as multinational companies implement the China +1 strategy.

Management expects the congestion situation to ease somewhat before the end of the year, while container throughput will increase by between 6% and 8% in the medium term, and about 4% to 5% in the long term.

Analysts pointed out that the company's current freight rate will expire at the end of August, and the proposed container freight rate is expected to rise to cover inflation and port 2.0 capital expenditure.

Furthermore, by allocating tenant portfolios, leasing models, and introducing more restaurants, the airport's commercial revitalization plan has borne fruit. The current occupancy rate is 80%, which is expected to reach 87% by the end of the year.

As for privatization activities, it is understood that Malaysia Airport has received approval from the Saudi Arabian General Competition Authority (GAC), and there are still 3 prerequisites to be completed.

In addition to this, Qianjiangtech is still weighing the viability of entering the US, European, and Japanese markets within the next 3 years, if it can obtain sufficient demand for mature node cleaning in these markets from major customers.

Customer demand continues to rise, but the company is facing labor shortages, particularly at the new Plant 2.

Higher employee costs may put pressure on the company's earnings next quarter, but management expects the outlook for the second half of the year and beyond as market share expands.

Once all opportunities have been realized, management expects revenue for FY2026 to reach RM3 billion, an increase of 121% over FY2023. The company is expanding production capacity in Penang and the Philippines, which is expected to be completed next year.

Meanwhile, the company anticipates that the launch of a new generation of flagship phones equipped with artificial intelligence will bring about a supercycle.

The company's focus on developing centers of excellence and increasing the market share of medical tourism in Malaysia may help drive future revenue intensity, while there is room for further efficiency within the organization. The company aims to add 350 beds this year and carry out targeted expansion to establish centers of excellence focusing on cardiology, oncology, gastroenterology, etc.

Management said it is actively seeking new brands or models that can be launched using the company's strengths, including real estate channels and networks, supplier contacts, and operational knowledge.

Analysts believe this is critical to consolidating the continuation of the company's growth, as the saturation of its current operating model is worrying.

Notably, the Malaysian stock market continued. It rose 10.76 points on Monday (15th) and closed at 1629.82 points, a record high in three years.

Despite a brief correction in June, Malaysian stocks continued to sprint upward with the return of foreign capital.

Looking back at today's trading volume, trading volume was flat in early trading and active trading in midday trading pushed the composite index to 1632.69, then the increase narrowed somewhat, to the lowest level of 1627.

Close to the last 15 minutes of the closing of the market, more capital was injected into the stock market, which pushed up the composite index and finally closed to the level of 1629.82.

The last time the Malaysian stock market closed higher than 1,630 points, it also dates back to March 10, 2021.

Foreign capital continued to flow in on a short trading day last week. Foreign investors bought Malaysian stocks for the second week in a row, with a total net purchase of RM0.4 billion78.2 million last week.

According to the MIDF study's capital flow report released this week, the Bank of China announced on Thursday that it would maintain the overnight policy interest rate (OPR) at 3.0%. This is the seventh time in a row that it has maintained this level. As a result, foreign capital poured in a large amount, with a total inflow of RM0.3 billion 89.2 million on the same day.

The top three sectors bought by foreign investors last week were construction (RM0.1 billion89.2 million), utilities (RM0.1 billion11.61 million), and industrial products and services (RM0.1 billion11.8 million). The top three sectors sold by foreign investors were consumer products and services (-92.7 million ringgit), energy (-33.4 million ringgit), and health care (-21.9 million ringgit).

Similar to foreign investors, local institutions also began net selling Malaysian stocks after three consecutive weeks of buying, selling a total of RM0.3 billion.

In terms of participation, the average daily transaction value (ADTV) of foreign investors increased by 24.7%, local institutions increased by 10.9%, and retail investors alone fell by 1.3%.