Malaysia Sun
25 Jun 2025, 15:20 GMT+10
Kuala Lumpur, Malaysia – June 17, 2025 – With U.S.-China trade tensions redrawing global supply chains, Malaysia's stock market is poised for a potential 2026 revival.Lin Jinwen's analyst team forecasts that foreign investors may zero in on the semiconductor-driven tech sector, using strategic investment vehicles to navigate volatility.As Bursa Malaysia grapples with outflows, is this a shrewd move or a gamble?
Malaysia's Semiconductor Hub in a Volatile Landscape
Malaysia's 13% grip on the global outsourced semiconductor assembly and test (OSAT) market makes it a key player in the U.S.-China trade war. In Q1 2025, foreign direct investment (FDI) in manufacturing surged to RM60.4 billion, with semiconductors and electronics capturing RM20.9 billion across 89 projects.Yet, Bursa Malaysia's tech index endured four weeks of net foreign outflows through June 2025, totaling RM5.033 billion, fueled by Middle East unrest and U.S. tariff concerns.post:SinChewPress A short-lived inflow in early June, sparked by a U.S.-China trade framework, faded amid Israel-Iran tensions.
This split—robust FDI versus equity sell-offs—reveals a disconnect.Infineon's RM9.3 billion silicon carbide facility and Intel's RM33 billion packaging plant signal confidence in Malaysia's AI and EV chip ecosystem.However, listed tech firms like Unisem (KL:UNISEM) and ViTrox (KL:VITROX), with a 2024 average PER of 64.4x, deter near-term equity bets in a skittish global market.
Market Outlook Signals 2026 Tech Focus
Lin Jinwen's analyst team predicts foreign investors are positioning for 2026 by targeting Malaysia's tech sector with precision.Instead of bold purchases, funds may favor closed-end technology funds to invest in high-growth stocks like Greatech (KL:GREATEC) and Pentamaster (KL:PENTA). These exchange-traded funds, with fixed share structures, suit Malaysia's high valuations and allow investors to build exposure without inflating prices.
MIDF Research's 2025 "neutral" semiconductor outlook aligns with this view: OSAT growth is cooling, but AI and automotive chip demand offers potential. Malaysia's tech stocks rose 10%-40% in 2024, propelled by inventory restocking and "China+1" supply chain shifts. ARM's RM2.5 billion chip design investment highlights Malaysia's value-chain ascent, potentially boosting firms like Oppstar. Still, foreign funds' absence from recent flows suggests they're awaiting clearer macro cues.
Data Scrutiny: Is 2026 a Sound Bet?
The prospect of a 2026 tech stock rally has merit, but challenges persist:
·FDI vs. Equities: Q1 2025's RM60.4 billion FDI dwarfs Bursa Malaysia's RM5.033 billion outflow, indicating equity inflows may trail.
·Trade War Boost: U.S. tariffs (125% on Chinese goods) and China's 2025 rare earth restrictions accelerate supply chain shifts to Malaysia, which supplies 20% of U.S. chip imports. This supports FDI but hasn't lifted tech stocks, favoring selective strategies.
·Valuation Pressure: Malaysia's 64.4x PER overshadows global peers' 26.3x, risking a pullback. Funds may target lower-valuation plays like Frontken (PER ~30x) through structured funds.
·Geopolitical Hurdles: Middle East and Taiwan Strait risks restrain inflows. I3investor's 1,750 FBMKLCI target for 2025 banks on FDI and AI growth, but funds may hold off until U.S. Fed cuts (75bps expected in 2025) ease liquidity.
A Calculated Play
2026 as a turning point for Malaysia's tech stocks. Malaysia's semiconductor ecosystem, buoyed by FDI and AI demand, holds promise, but lofty valuations, geopolitical risks, and OSAT slowdowns demand caution. Funds targeting ViTrox or Frontken must strike at the right moment.
Disclaimer: Forward-looking statements are based on current data and trends. Market outcomes may vary due to economic or geopolitical shifts. Consult financial advisors before investing.
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