RHB Investment Bank Bhd (RHB Research) has released its market outlook, expressing optimism for 2025 despite ongoing uncertainties. The report highlights that while volatility is expected to persist as the new US policy package unfolds, the domestic environment in Malaysia remains conducive for investment.
With robust liquidity conditions, reasonable corporate earnings prospects, and undemanding equity valuations, RHB Research anticipated a positive investment climate.
The global macroeconomic outlook appears solid, with RHB Research projecting GDP growth of 2% for the US and 4.8% for China in 2025. The expectation of a cumulative 75 basis points reduction in the US Federal Funds Rate (FFR) is likely to ease the US dollar due to narrowing interest rate differentials. However, geopolitical risks and potential inflation concerns stemming from Donald Trump's re-election may pose challenges.
Domestically, Malaysia's economy continues to grow steadily, bolstered by both external and internal factors. The anticipated formalisation of the Johor-Singapore Special Economic Zone is expected to create new growth opportunities in the southern region. Stable political conditions and ongoing reforms are likely to enhance investor sentiment. With corporate earnings showing resilience and market valuations at attractive levels — forward price-to-earnings (P/E) at just 14.3 times — the outlook for Malaysian equities remains positive.
RHB Research's investment strategy focuses on accumulating quality stocks during market weaknesses, particularly large-cap stocks. The report indicates strong support for the FBM KLCI at the 1,590-point level, suggesting limited downside risk. RHB Research has set an end-2025 target for the FBM KLCI at 1,820 points, reflecting a target P/E of 16 times based on FY26F earnings.
The research house remains OVERWEIGHT in sectors including banks, property, construction, plantation, technology, healthcare, basic materials, oil and gas, utilities and rubber products. Key risks identified include unpredictable geopolitical developments and potential fallout from escalating US-China trade tensions that could impact Malaysia.
