Malaysia’s stock market lags behind regional peers in 2025

The FBM KLCI rose just 2.3% while the stock markets of major Asian nations soared to lofty heights this year.

South Korea’s Kospi Composite Index is the world’s best-performing major stock index after surging 76% in 2025. (EPA Images pic)

PETALING JAYA:

 In a year that saw the equity markets of South Korea, Japan, Taiwan, China, Hong Kong, and Indonesia surging to lofty heights, Malaysia’s stock market has been running on fumes just trying to keep up.

South Korea, Asia’s worst-performing market in 2024, staged a remarkable comeback after its Kospi Composite Index became the world’s best-performing major stock index in 2025, surging 75.6% on the back of artificial intelligence (AI) and technology themes.

Hong Kong’s Hang Seng Index soared 30.6%, Taiwan’s Taiex rose 26.8% followed by Japan’s Nikkei 225 (26.2%) and China’s Shanghai Composite Index (18.4%).

At the Asean level, Singapore’s Straits Times Index jumped 22.7% while Indonesia’s Jakarta Composite Index rose 22%, the most since 2014.

In contrast, Malaysia’s stock indices underperformed its Asian neighbours in 2025. The benchmark FBM KLCI eked out a 2.3% increase but the FBM Emas Index, which tracks Main Market stocks, fell 2.2%.

The smaller cap stocks fared worse with the FBM Small Cap Index tumbling 12.2% and the ACE Market Index down 9.2%.

Some of our Asean peers fared much worse. Thailand’s SET Index fell 10.1% while the Philippines’ PSEi Index dropped 7.3%

Huge foreign outflows

Malaysia’s equity market has remained largely out of favour with foreign investors throughout 2025, with foreign net outflows hitting the third-highest level in 15 years.

Foreign investors remained net sellers of Malaysian equities in the final quarter, with net outflows of RM4.32 billion as at Dec 12, compared with RM4.3 billion in Q3, according to MBSB Research.

Malaysia recorded cumulative foreign net equity outflows of US$4.8 billion (RM19.43 billion) in the first 11 months of 2025, marking the third-largest annual outflow since 2010.

Phillip Capital noted this is not an isolated event, as Malaysia has suffered foreign net outflows in nine of the past 11 years.

“We view this as indicative of Malaysia’s waning relevance among global investors, given its modest circa 1% weight in the MSCI Emerging Markets index and the relatively stronger appeal of other Asian markets offering greater exposure to structural growth themes,” it said in a recent market outlook report

The research house said the country’s equity market remains heavily concentrated in “old-economy” sectors, with limited representation in the AI space, reducing its attractiveness in an increasingly thematic-driven investment environment.

Malaysia’s strengthening currency also appears to have impacted stocks that are highly dependent on exports. The ringgit has been one of the best-performing Asian currencies this year, appreciating by more than 9% against the US dollar.

A fund manager said for such companies, exports are denominated in the greenback and the ringgit’s steep rise means their earnings and profits will shrink substantially when converted back to ringgit. - FMT