KUALA LUMPUR (April 22): As local stocks lose prominence in global investors’ portfolios, Malaysia has to urgently increase the quality and scale of large-cap companies while pushing into higher-growth sectors.

While Bursa Malaysia benefitted from a strong initial public offering (IPO) run in 2025, the majority of the new listings were smaller firms from the industrial and consumer sectors, limiting investment options and diversification, according to the Securities Commission Malaysia (SC).

“Malaysia risks being increasingly overlooked by passive investors due to its diminishing representation in major global indices,” the SC cautioned.

Malaysia’s representation within major global indices, particularly the MSCI Emerging Market Index, has been on a persistent decline since 1988 as markets such as China, Taiwan, India and South Korea grew faster and took a bigger share of investors’ funds.

The indices are closely watched by fund managers and international investors, who may buy or sell the stocks in their portfolios to mirror the benchmarks.

Information technology stocks account for a sizeable chunk of the indices while Malaysia’s top stocks are dominated by traditional industries such as financial services and commodities, reducing their appeal to international investors while limiting capital inflows and liquidity.

Smaller companies and less liquid stocks are also frequently excluded from consideration by institutional investors.

“This reinforces the imperative for Malaysia to proactively strengthen country- and market-level fundamentals to support its attainment of developed-market status in order to elevate its international market standing and broaden access to a deeper and more diversified global capital base,” the SC said.

In the nearer term, the Malaysian capital market appears supported by robust macro fundamentals, sound corporate performance, ample domestic liquidity and well-established market infrastructure, the securities regulator said.

Global monetary easing, which could increase foreign portfolio flows into emerging markets like Malaysia, and rising investments related to artificial intelligence could aid Malaysia’s capital market in 2026, the SC noted.

For more SC 2025 Annual Report stories, click here.