KUALA LUMPUR (March 28): Malaysia’s stock market will stay volatile in the near term, as investors continue to fret over international trade tensions, strategists warned.

The volatility could persist until June and the market may only rebound in the second half of this year, CGS International said. Rate cuts by the US Federal Reserve in the second half of 2025 could provide tailwinds for both the ringgit and Bursa Malaysia, the research house said.

There is also the possibility of trade tensions de-escalating by then, CGS International said. Inflationary impact and legal battles will make it less appealing for the US to sustain the tariffs, while concessions by its trading partners will help avert a full blown trade war, the house noted.

Despite rebound from recent selloffs, Malaysia’s FBM KLCI is still down about 6% from the end of 2024, amid persistent outflow. Foreign investors remained net sellers of Malaysian equities and most major markets in Southeast Asia have also suffered outflows.

The ringgit, meanwhile, has remained largely steady, following strong appreciation against the US dollar last year.

“We expect the market to stage a comeback” in the second half,” CGS said. KLCI’s valuations are also compelling, with its earnings multiple mostly at below its five-year mean, said CGS, while telling investors to focus on domestic consumption from recent government measures.

The government has raised cash handouts, and announced an increase to civil servant salaries and other measures to help prop up household spending and cushion the rising cost of living from subsidy rationalisations.

For Maybank Investment Bank, Malaysia’s market still holds strength from domestic-centric policy drivers, and the country is also going through an investment upcycle with foreign direct investments materialising.

While its year-end target of 1,700 for the KLCI now appears optimistic given current market conditions, the house said it is maintaining the target, betting on effective execution of government policy initiatives to drive the market higher.

“We do believe there are opportunities to accumulate stocks for the long term,” Maybank said.

For strategy, Maybank is positive on banks, consumers, and hospitals, as well as select stocks in the construction, oil and gas, aviation, real estate investment trusts, renewable energy and technology sectors.