Window for bargain hunters
THE Malaysian equity market has kicked off 2025 on a volatile note, but analysts see promising investment opportunities for those who can navigate the turbulence.
Despite recent market weakness, it is believed this downturn presents a chance for investors to capitalise on bargain-hunting opportunities, as several Bursa Malaysia stocks still hold strong upside potential.
UOB Kay Hian (UOBKH) Research, for instance, recommends that investors remain focused on companies that are poised to benefit from the upcoming results season.
“Our alpha picks are focused on the upcoming results season winners, while awaiting for other trading opportunities as external headwinds begin to ease (as hoped),” the research house highlights.
In its report over the week, UOBKH Research states that its top alpha picks for February 2025 include Gamuda Bhd, Genting Malaysia Bhd (GenM), Kossan Rubber Industries Bhd, MR DIY Group (M) Bhd, MyEG Services Bhd (MyEG), Pekat Group Bhd, RGB International Bhd, RHB Bank Bhd, VS Industry Bhd (VSI) and Yinson Holdings Bhd.
Potential upside
UOBKH Research favours Gamuda for its robust earnings growth ahead, backed by a record-high order book and a solid tender book pipeline.
For GenM, the research house points to promising profitability momentum in the fourth quarter of 2024 (4Q24) and 1Q25, along with lush dividend yield of 7% to 9% for 2024 to 2025.
Regarding Kossan, UOBKH Research expects the company to see higher sales demand and margin expansion, resulting from the revised US tariffs on China’s gloves.
For MR DIY, the expectation is that in-store schemes will lift same-store sales growth, while favourable foreign exchange in 1Q25 could crystallise into gains.
For MyEG, UOBKH Research highlights its earnings momentum from artificial intelligence (AI) and blockchain initiatives such as China-centric eCNY, ZTrade, WorldID and MyDigitalID.
Pekat Group is expected to ride on the long-term structural growth in solar energy demand, while RGB International could see record-high earnings in 4Q24, with growth momentum sustaining throughout 2025.
RHB Bank is projected to experience lower-than-expected credit costs and stronger-than-expected non-interest income.
VS Industry will likely post strong earnings for financial year ending July 31, 2026, partly driven by vertical integration and additional impetus from its Philippines venture, says UOBKH Research.
As for Yinson, the catalyst will likely come from its floating production storage and offloading (FPSO) division, with plans for an initial public offering valued at more than US$3bil in the US equity market by 2026.
Additionally, Yinson’s FPSO ventures in Brazil and the sale of its Anna Nery FPSO are expected to contribute.
Other themes
Besides the upcoming results, UOBKH Research states that other key investment themes that investors should monitor include increased discretionary spending, driven by a 7% to 15% pay hike for civil servants and a 13% minimum wage increase, as well as the impact of higher US import tariffs on Chinese goods, especially China-made gloves, which would benefit Malaysian manufacturers.
While the research house is reducing its exposure to AI and data centre plays, it remains optimistic about their long-term growth prospects, noting that Malaysian firms in this space continue to enjoy validated end-user certification despite regulatory concerns from the United States.
“The growth outlook for most Malaysian beneficiaries of new data centre demand remains robust, with their end-customers having the universal validated end-user certification despite concerns tied to the US Interim Final Rule on AI Diffusion and emergence of DeepSeek,” UOBKH Research says.
“Nevertheless, these new phenomena has prompted a valuation reset, and caused Bursa Malaysia’s construction and property indices to fall by 5% to 15%,” it adds.
Overall, the FBM KLCI tumbled 5.2% in January 2025, with the biggest losers being the construction sector (-16.6%), followed by property (-9.7%) and utilities (-8.2%) sectors.
Outside the index, renewable energy (+14.1%) and select oil and gas stocks emerged as the winners, while gloves (-15.4%), semiconductor technology (-12.7%) and manufacturing (-9.2%) suffered sharp declines.
Cautious market
Meanwhile, Rakuten Trade takes a slightly different approach, urging investors to focus on bargain-hunting opportunities amid the current market downturn.
The digital broker notes that historically, the Chinese New Year period has been a time of strong market performance, but this year has seen subdued activity due to external pressures.
“During this period, the local market usually records a retail participation rate of about 26%.
“This year, while it is on an uptrend month-on-month, we are seeing lower retail participation levels that do not mirror previous Chinese New Year rallies,” says Rakuten Trade chief executive officer Kazumasa Mise.
He also points out that the market has been declining since the start of 2025, compounded by net foreign outflows.
“A stronger dollar and (potential) restrictive policies, particularly those targeting AI chips, have dampened sentiment in our local market.
“We believe that now is an ideal time for bargain hunting, especially for investors who can look beyond short-term volatility.”
Rakuten Trade’s head of research, Kenny Yee, believes that despite near-term uncertainties, the FBM KLCI has the potential to test 1,730 points this year, supported by a 16 times price-to-earnings ratio based on 2025 earnings growth estimate.
He also notes that last year was a solid year for the ringgit, reversing from a low of 4.80 to 4.50 currently against the greenback.
“We believe that the local currency is currently undergoing some normalisation and is expected to trend between 4.30 and 4.40, on the back of stubborn interest rates in the United States,” he adds.
Bottom fish
Rakuten Trade acknowledges that movements in the US market will have a significant impact on Bursa Malaysia.
“The US market serves as the primary barometer for global equities. When they sneeze, Malaysia will catch a cold.
“However, a market rebound could be on the horizon once investors’ uncertainty is alleviated. The recent weakness presents an opportunity for retail investors to pick up bargain stocks, especially tech-related stocks which should be beneficiaries of a stronger dollar,” says Rakuten Trade equity sales head Vincent Lau.
In terms of political stability, Yee is cautiously optimistic.
“The domestic political environment seems somewhat steady, 2024 closed on a positive note. Is 2025 going to be the same?
“We hope so, as focus on the economy should be a priority now, especially with the recently launched Johor-Singapore Special Economic Zone, which would be the much-required booster that may bode well for future foreign direct investments,” Yee explains.
In the interim period, Rakuten Trade’s top stock picks for investment opportunities include GenM, Padini Holdings Bhd, Poh Kong Holdings Bhd, Heineken Malaysia Bhd and AEON Co (M) Bhd.
Despite lingering external headwinds – such as US policy uncertainties and potential volatility in AI-related stocks – factors like a strengthening ringgit, China’s fiscal stimulus prospects and resilient domestic consumption could provide market support.
Against this backdrop, investors should remain vigilant, focusing on quality stocks that can weather short-term fluctuations while positioning for long-term gains.