Malaysian equities rebound after Thaipusam break

[MALAYSIA] The Malaysian stock market made notable strides in catching up after the Thaipusam break, showing positive movements despite some global uncertainties. On February 12, 2025, the FBM KLCI, Malaysia’s benchmark index, rose by 2.37 points to 1,592.32. This increase was reflective of the positive momentum on Wall Street, which had experienced a surge the previous Monday, thanks in part to a rally in technology stocks.

Investor Sentiment Amid Global Concerns

Despite the optimism in domestic equities, investors were not immune to the broader global market sentiment. Investors faced concerns over the U.S. Federal Reserve's stance on interest rates, particularly after Fed Chair Jerome Powell’s remarks. Powell stated that there was no urgency to cut interest rates due to the robust job market and persistent inflationary pressures. This stance was in stark contrast to some investor expectations of a more dovish Federal Reserve. His comments sent U.S. Treasury yields higher, which, in turn, dampened enthusiasm for riskier assets like equities.

Nonetheless, local equities, particularly in Malaysia, showed resilience. Analysts noted that strong buying interest in sectors like banking contributed to the market's positive trajectory. Stocks such as Maybank, RHB, and Public Bank saw notable gains, with Maybank rising eight sen to RM10.54, RHB adding six sen to RM6.54, and Public Bank moving up by two sen to RM4.47.

Key Stocks Show Positive Movements

The stock market’s rebound was not confined solely to the banking sector. Other blue-chip stocks also contributed to the overall upward momentum. Gamuda gained six sen to RM5.45, while Telekom Malaysia rose by six sen to RM6.83. Kuala Lumpur Kepong, a prominent palm oil and plantation company, added 18 sen to reach RM20.40.

In the consumer sector, which has been a preferred choice for many investors amid market uncertainty, companies like Nestle and Dutch Lady saw steady gains. Nestle’s stock climbed by 18 sen to RM90.98, while Dutch Lady advanced by 29 sen to RM31.

Sector Focus: Banking, Consumer, and REITs

According to Malacca Securities Research, the market’s trajectory was in line with expectations. The research firm predicted that in the face of ongoing volatility, investors would increasingly turn to more conservative sectors like consumer goods, banking, and Real Estate Investment Trusts (REITs). This prediction has been supported by recent trends where banks like Maybank and Public Bank demonstrated notable resilience, indicating investor confidence in the stability of these institutions amid global uncertainties.

Moreover, the resurgence in mall foot traffic, as mentioned by Malacca Securities, could provide an additional boost to retail and consumer-related stocks, offering opportunities for investors seeking safer bets.

The Impact of U.S. Economic Policy on Malaysian Markets

The market’s behavior in Malaysia was also influenced by global geopolitical and economic developments, notably the U.S.-China trade tensions. U.S. President Donald Trump’s 25% tariff on steel and aluminum imports had implications not only for the U.S. but also for the global market, particularly for local steel players. Analysts from Malacca Securities suggested that this tariff policy might benefit domestic steel producers as it potentially reduces competition from export-oriented players, providing a window for local players to capitalize on the trade environment.

Looking Ahead: Fed’s Strategy and Malaysian Equities

The comments by Jerome Powell and the broader economic picture point to a potential period of caution. Powell emphasized that there was no rush to cut rates, as inflation remains elevated, and the job market continues to show strength. The Fed will likely need more concrete evidence of a slowing economy and reduced inflation before making any substantial policy changes. In the meantime, market participants are keeping a close eye on any developments related to the U.S. Federal Reserve’s future actions, as well as the potential impact of ongoing trade wars.

However, domestic factors in Malaysia, such as the strong performance in banking and consumer sectors, may provide some buffer against external volatility. The relative stability of sectors like banking and REITs, which offer steady yields, could make them attractive in times of global uncertainty.

While global concerns like U.S. interest rate policy and trade tensions continue to loom large, Malaysia’s stock market has proven resilient. As the market continues to digest both domestic and international developments, sectors like banking, consumer goods, and real estate remain strong contenders for investors seeking stability in the current climate. With investors favoring conservative plays, Malaysia's stock market may see further growth, especially as it rebounds after the Thaipusam break.

Despite global challenges, Malaysian equities are poised to make continued gains, driven by investor interest in blue-chip stocks, and a growing emphasis on sectors such as banking, consumer goods, and REITs. Investors are likely to maintain cautious optimism, balancing potential risks with the opportunities presented by resilient sectors in the local market.