9 hours Ago By S. BIRRUNTHA
KUALA LUMPUR: Bursa Malaysia, together with other Asian bourses, is under siege from global market turbulence, with relentless foreign fund withdrawals and a dip in investor confidence casting a dark shadow over the local stock exchange.The FTSE Bursa Malaysia KLCI (FBM KLCI), the benchmark index, fell to its lowest point in a year, dropping 16.31 points or 1.
06 per cent to 1,520.15, pulling down all 33 indices on the local bourse with it.Leading the downturn, the Bursa Malaysia Healthcare Index, dropped 2.
49 per cent or 46.89 points to 1, 839.4.
Over 900 counters closed in the red, with more than two-thirds of the stocks in the 30-component FBM KLCI suffering losses, led by 99 Speed Mart Retail Holdings Bhd, which dropped 4.3 per cent.So far this year, the FBM KLCI has declined by nearly seven per cent, edging close to the 10 per cent drop that typically signifies a market correction, a significant but temporary decline in value.
UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said the sharp sell-off in US equities, which pushed the S&P 500 and Nasdaq Composite to six-month lows, has added to the mounting pressure on emerging markets, including Malaysia. "Technology stocks led the downturn, reflecting growing fears over the US economic outlook and rising recession risks. "The local market has not been spared.
Foreign institutional investors have been net sellers for 18 consecutive sessions, driving year-to-date outflows to RM6.58 billion. "In the first two months of 2025 alone, Malaysia recorded RM5.
3 billion in portfolio outflows — the largest capital flight since 2020. "The foreign ownership of Malaysian equities fell to 19.6 per cent in February, well below the 25.
2 per cent peak seen in 2013," he told Business Times. Mohd Sedek warned that the risk of sustained capital outflows remains high, as investors continue to seek safer assets amid global uncertainty. "As risk aversion grows, capital is shifting toward economies with stronger macroeconomic fundamentals, stable fiscal policies, and less exposure to Trump's tariffs," he said.
He added that expectations of a US Federal Reserve rate cut in May — followed by two more in the third quarter — point to a weaker growth outlook in the US, with ripple effects on global capital flows. "Unless stronger policy measures are introduced to restore sentiment and attract long-term foreign investment, Malaysia's market remains vulnerable," he said. Looking ahead, Mohd Sedek said market direction hinges on external developments.
In a bearish scenario, extended weakness could persist if US recession concerns deepen, global growth slows further, and foreign fund outflows accelerate. While direct government intervention in the market is neither feasible nor sustainable, he believes structural reforms are needed to bolster resilience. "Enhancing domestic institutional participation through greater equity exposure from the Employees Provident Fund (EPF), Kumpulan Wang Persaraan (Diperbadankan) (KWAP) and Permodalan Nasional Bhd (PNB) could help cushion the impact of foreign exits," he said.
Mohd Sedek also proposed tax incentives for long-term investors and improving Malaysia's weightage in global indices such as MSCI Emerging Markets and FTSE Russell to improve the market's appeal. "Trade diversification should be a priority to reduce reliance on the US and China, with greater focus on Asean, the European Union (EU) and India to mitigate trade tension risks," he said. Ultimately, Mohd Sedek said short-term volatility will continue to be driven by global developments, and it is unrealistic to expect government actions to fully shield the market.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the key concern for Bursa Malaysia now is the heightened level of market uncertainty. He pointed to the latest reading of the CBOE Volatility Index (VIX), which rose to 27.86 points and has remained above 20 points since early March — a clear sign of growing investor anxiety.
"This reflects that investors and traders are becoming increasingly nervous about the outlook for equities, driven by tariff policies under the Trump administration and ongoing geopolitical tensions," he said. As a result, Afzanizam said foreign investors are turning risk-averse, opting to cash out of equities in favour of safer instruments such as money market funds and government securities. Commenting on how US recession fears, tariff policies, and political uncertainty could influence appetite for Malaysian equities in the medium term, Afzanizam highlighted Malaysia's close economic correlation with the US.
"The coefficient of correlation stands at 71 per cent which means Malaysia's gross domestic product (GDP) tends to mirror US GDP quite closely. "Generally, countries across the globe have higher correlation with the US economy. "Hence, the common adage when the US sneezes everyone catches a cold is still valid," he said.
With the FBM KLCI currently at a one-year low, Afzanizam said the market outlook largely depends on how far the Trump administration is willing to soften its policy stance. "Otherwise, it will fall back to the Fed and whether are we going to see another round of quantitative easing to be implemented again. "The fact that the Fed is willing to provide more monetary stimulus, it could turnaround the weak market sentiments," he noted.
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