Country still an attractive investment destination
PETALING JAYA: Tariff negotiations and the 13th Malaysia Plan (13MP) will be key factors that determine how investor sentiment is on Bursa Malaysia for the second half of the year (2H25).
Hong Leong Investment Bank Research (HLIB Research) is optimistic Malaysia can negotiate a lower tariff level than the 25% announced by the White House effective before the Aug 1 deadline date.
However, it said even if the tariff rate was to remain at the current level, the country will remain an attractive investment destination among foreign investors despite Vietnam (20% tariffs) and Indonesia (19% tariffs) having successfully negotiated a lower tariff rate.
“The gaps are modest and we believe they unlikely to deter foreign investments meaningfully. Even if tariffs remain elevated, policy tools like tax incentives can cushion the impact, in our view,” the research house stated in a strategy report.
It added that Malaysia’s corporate tax rate of 24%, versus 22% in Indonesia and 20% in Vietnam, has not historically hindered investments here due to the country’s strong manufacturing base and supply chain links.
“We see these structural strengths will continue to make Malaysia an attractive destination under the global supply chain diversification or ‘+N’ strategy,” HLIB Research stated.
The research house has a 2025 target of 1,640 points for the benchmark FBM KLCI, with the valuation based on a 14.5 times price-earnings multiple, adding there is ample liquidity on the sidelines which is deployed increasingly by buying on dips.
It however warned global markets are vulnerable to profit-taking and top-slicing activities, following the sharp rally after the announcement of US tariffs in April.
“Global equity prices have stayed relatively resilient, and overall market composure seems intact, which is arguably too calm.
“This prevailing stability may reflect a degree of complacency that suggest markets could be underpricing the risk of Trump following through with his latest tariff threats in August,” HLIB Research stated.
It added the muted reaction on global markets may inadvertently embolden US President Donald Trump to follow through with his high reciprocal tariffs as his confidence has been reinforced by several recent successes such as the over US$100bil in customs duties collected without significantly derailing the economy, and continued strength in US equity markets which are trading at record highs.
The research house however anticipates the equity market in the third quarter of this year (3Q25) to remain volatile due to macro and policy factors with 4Q25 likely becoming more calmer with any sharp drop in the market viewed as an opportunity to buy high beta stocks in particular.
HLIB Research forecast the 13MP, which will be tabled in Parliament by the end of this month, to propose RM440bil of development expenditure and to have a globalist stance underpinned by the Madani ethos with projects reinforcing national flagship policies like the National Energy Transition Roadmap, New Industrial Masterplan 2030 and the National Semiconductor Strategy.
This should provide leads for investors to pick stocks that can benefit from the 13MP plans.
HLIB Research top picks at present are stocks of companies like CIMB Group Holdings Bhd, Sunway Bhd, Gamuda Bhd, 99 Speed Mart Retail Holdings Bhd, AMMB Holdings Bhd, IOI Properties Group Bhd, Dialog Group Bhd and SMRT Holdings Bhd.