Sentiment likely to improve in second half
PETALING JAYA: After a tumultuous first half triggered by external headwinds, one research house sees the market staging a comeback in the second half of 2025 (2H25), albeit with volatility.
CGS International (CGSI) Research said that it sees US tariff tensions ebbing in 2H25, although it remained cognisant that bouts of escalations could still sprout within the broader de-escalating trend.
'As tariff negotiations between Malaysia and the United States appear to be progressing well, we are cautiously optimistic that a mutually beneficial outcome can be achieved,' it told clients in a report.
It said given their record low shareholding, it reckons foreign investors have yet to fully appreciate Malaysia's ongoing rejuvenation – which is already seeing economic reforms in motion, influx of approved investments and a more stable political landscape.
CGSI Research has put its year-end-2025 FBM KLCI target at 1,670 points, premised on a 15 times price earnings (P/E) tagged to the 2025 earnings per share.
'Our ascribed P/E multiple is in line with its post-pandemic average,' the research house said.
'Rock-bottom foreign shareholding offers a downside cushion, we opine.'
CGSI Research said the ongoing tariff woes will still have an impact on Malaysia's open economy.
Its 2025 gross domestic product forecast of 4.2% year-on-year (y-o-y) is below the government's 4.5% to 5.5% projection.
'Still, we get a sense that this has not deterred the unity government from its economic reform agenda. Revisions to the sales and service tax were done twice (in March 2024 and July 2025) to broaden the public revenue base, while subsidy rationalisation efforts are ongoing.'
The research house also noted that the government has developed various strategic plans, which have helped boost approved investments in Malaysia to new record highs.
'In our view, this has started to bear fruit, evident from the robust growth in gross fixed capital formation averaging 11.6% y-o-y from the first quarter of 2024 (1Q24) to 1Q25. Malaysia's political landscape is also now on firmer ground with Prime Minister Datuk Seri Anwar Ibrahim and his government outlasting the past three administrations, alongside a rise in approval ratings.'
CGSI Research noted in 1H25, the benchmark FBM KLCI declined by 6.7% with the losses largely cushioned by the ringgit's 6.2% appreciation, bringing its currency adjusted returns to a slight dip of 0.9% over the said period.
Nevertheless, the latter still lagged the regional MSCI AC Asean Index which gained 3.4% in 1H25, mostly aided by Singapore's stock market benchmark index.
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