KUALA LUMPUR (April 22): A sharp sell-off by institutional investors would only dent the FBM KLCI, according to a stress test by Securities Commission Malaysia (SC).
The Capital Market Stability Review 2025 found that even in a worst-case scenario — where fund managers sell RM6.85 billion in a single day, about twice the average daily trading value in 2025 — the benchmark index would fall by just 102.3 points or 6.35% to 1,509.58.
Under this scenario, the regulator said most stocks would see moderate declines, with only one experiencing a sharper drop. Overall, the impact remains manageable and below Bursa Malaysia’s 10% circuit breaker threshold.
Institutional investors hold about 13% of the KLCI’s market capitalisation.
The stress test comes at a time where foreign investors were net sellers with a net outflow of RM22.32 billion as at end-December 2025.
As at Sept 30, 2025, 1,131 investment funds with a combined net asset value (NAV) of RM666.57 billion were assessed, the SC said.
Mixed-asset funds made up the largest share, followed by equity and fixed-income funds. Assets were mainly allocated to equities (49.19%), cash and cash equivalents (21.15%), and corporate bonds and sukuk (15.36%), with the remainder in collective investment schemes (CIS), government securities and other investments.
According to the SC, most equity holdings — 61.53% — are held domestically.
The industry is highly concentrated, with just 0.71% of funds accounting for 45.07% of total NAV, while over half of funds hold less than RM100 million and make up only 2.88% of assets.
Under stress, the SC found funds would liquidate about 44.12% of assets to meet withdrawals, without the need to draw on liquidity buffers, suggesting that the portfolio structure provides adequate liquidity.
Compared to total holdings, funds would sell 59.49% of cash and cash equivalents and 75.61% of government securities. Equities would see a moderate 45.83% sell-off. Meanwhile, less liquid assets like CIS (28.63%) and corporate bonds and sukuk (17.99%) would be sold less.
Overall, the results show that investment funds are resilient in handling redemption shocks, even during falling asset prices.