KUALA LUMPUR, April 28 — Macroeconomic resilience and political stability are key strengths for Malaysia in navigating the volatile global economic environment amid the United States (US) policy shifts, said RHB Investment Bank Bhd.
It said that the country's strategic growth initiatives will stimulate investment flows over the medium term, but it remains cautious on the adverse spillover effects from global trade issues.
"The progressive growth initiatives implemented by the government will strengthen Malaysia’s ability to attract foreign investment from or around the region, drive domestic investment, and improve economic resilience.
"Malaysia stands out among other Asean emerging market peers from a political stability and macroeconomic growth fundamentals’ standpoint," RHB Investment said in a note today.
The 2025 gross domestic product (GDP) growth forecast for Malaysia is now at 4.5 per cent year-on-year (y-o-y) due to external uncertainties.
"While we believe the imposition of US tariffs is transactional — leaving the door open to negotiations — uncertainty will keep investor sentiment on edge," it said.
Meanwhile, RHB Investment has cut its end-2025 FTSE Bursa Malaysia KLCI (FBM KLCI) target to 1,650 from the previous target of 1,750 after cutting the target price-to-earnings (P/E) ratio back to the long-term mean of 14.7 times from 16 times.
The market has consolidated further with valuations now at even less demanding levels.
“Maintaining defensive colour in equity portfolios will be a key strategic emphasis to conserve higher cash holdings in the short term, but selectively accumulating quality domestic-centric stocks on weakness is also an important medium-term objective,” it said.
In the near term, RHB Investment believes that investor interest will likely remain skewed towards the larger-cap space due to its below-mean valuation and superior liquidity, which are particularly attractive in the currently volatile external environment.
“Given this outlook, we recommend adopting a phased strategy — investors should first focus on mid-cap stocks, which offer a more balanced risk-reward profile,” it said.
As the market begins to stabilise and external uncertainties subside, a gradual shift towards smaller-cap names could unlock additional alpha returns if the rebound is sustained.
“Ample local liquidity, stable domestic consumption, and a reform agenda remain constructive to the Malaysian equity market,” RHB Investment said.
— Bernama
