KUALA LUMPUR (Feb 5): January 2025 was the worst first month of the year for Malaysian stocks in three decades, amid massive foreign sell-offs, though February has been historically positive, CIMB Securities said on Wednesday.

The benchmark FBM KLCI declined 5% month-on-month last month, the steepest decline for January since 1995. Foreign investors dumped RM3.1 billion worth of Malaysian equities, the highest monthly net selling by foreign investors since 2020, according to CIMB Securities.

Proxy stocks to artificial intelligence and data centres were hit, following tightening US restrictions on the export of advanced semiconductors, and more recently the emergence of Chinese artificial intelligence start-up DeepSeek.

The bulk of the foreign selldown took place in the utilities and property sectors, which together accounted for more than one-third of net outflows. In terms of sectoral indices, construction was the worst performer, while real estate investment trusts (REITs) bucked the broad selldown, ekeing out a 0.4% gain.

Local institutional investors mopped up the selling, purchasing RM1.23 billion worth of equities, while retail investors bought a net RM1.2 billion in January.

The KLCI also underperformed the regional benchmark gauge MSCI All Country ex-Japan Index, which rose 0.6% month-on-month in January.

Following the selldown, the KLCI is now trading at a discount to the five-year mean of its earnings multiple, “presenting an opportunity for bottom-fishing”, CIMB Securities said, noting that the KLCI has averaged a return of 0.8% in February over the past 10 years, and 2.2% over the past 47 years.

The research house maintained its KLCI target at 1,763 points, and for strategy, reaffirmed its top stock picks CelcomDigi Bhd (KL:CDB), Hong Leong Bank Bhd (KL:HLBANK), Gamuda Bhd (KL:GAMUDA), Tenaga Nasional Bhd (KL:TENAGA), and Genting Malaysia Bhd (KL:GENM).

Key events to watch out this month are the 15th Parliament sitting that will last until March 6, the MSCI index review decision on Feb 11, and the release of fourth-quarter gross domestic product data on Feb 14, as well corporate earnings announcements and US trade policy updates.

Investors would also be monitoring the impact of the minimum wage increase to RM1,700 on corporate earnings, and the government’s recent decision to introduce a 2% mandatory pension contribution for foreign workers, CIMB Securities added.