KUALA LUMPUR, Nov 5 (Bernama) -- Bursa Malaysia closed higher, buoyed by Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 2.75 per cent, alongside positive cues from Wall Street. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 19.30 points, or 1.19 per cent, to 1,635.86 from Wednesday’s close of 1,616.56. The benchmark index opened 6.72 points higher at 1,623.28, and fluctuated between an intraday high of 1,642.44 and a low of 1,622.62 during the trading session. However, market breadth was negative, with losers outnumbering gainers 723 to 497, while 466 counters were unchanged, 1,075 untraded and 10 suspended. Turnover rose to 3.74 billion units valued at RM3.61 billion compared with yesterday’s 2.81 billion units valued at RM2.57 billion.
Key Insights:
Global Growth Slowdown:
- The Institute of International Finance (IIF) projects global GDP growth to moderate to 2.7% in 2025, down from 2.9% in 2024.
- Emerging markets (EMs) are expected to grow 3.8%, maintaining a higher growth rate than developed economies but still facing challenges.
Decline in Capital Flows:
- Capital flows to EMs are projected to decline by 24% to $716 billion in 2025, compared to $944 billionthis year.
- China faces the largest impact, with $25 billion in outflows expected for 2025, marking a significant reversal in foreign investment trends.
Tariffs and Policy Uncertainty:
- President-elect Donald Trump’s tariff threats are dampening investor sentiment.
- If proposed 60% tariffs on China and 10% tariffs globally are implemented, it could worsen global trade disruptions, further straining EM capital flows.
Regional Trends:
China's Challenges:
- China’s first outflow of foreign direct investment in decades signals diminishing investor confidence.
- Portfolio flows to China are set to turn negative, reflecting growing economic headwinds.
Resilience in Non-China Emerging Markets:
- Resource-rich regions in the Middle East and Africa are expected to lead inflows in bonds and equities.
- Structural shifts, such as supply chain diversification and strong demand for local currency debt, are bolstering these regions.
Factors Impacting Capital Flows:
- Stronger US Dollar:
- A rising dollar increases the cost of borrowing for EMs, reducing their attractiveness to investors.
- US Federal Reserve Policy:
- Slower-than-expected interest rate cuts limit global liquidity, curbing appetite for riskier EM assets.
- Trade Policies:
- Tariff uncertainties exacerbate global supply chain disruptions, further dampening capital flows.
IIF's Warning on Tariffs:
- The IIF emphasizes that its base case assumes selective tariff implementation.
- Full implementation of Trump’s tariff threats could amplify risks, with significant disruptions to global trade and EM supply chains, compounding the decline in capital flows.
Opportunities Amid Challenges:
- Emerging Market Diversification:
- Non-China EMs remain attractive due to their resource wealth, local currency debt demand, and structural improvements in risk sentiment.
- Localized Investment Focus:
- Investors are likely to prioritize regions with strong fundamentals and diversified economies, such as Africa and the Middle East.
Key Takeaways:
- Investor caution is rising as global economic conditions tighten, and the prospect of aggressive US tariffs looms.
- China’s declining inflows highlight the need for diversification within EM portfolios.
- Non-China EMs could benefit from supply chain realignments and resilient economic fundamentals, but the overall environment for capital flows remains challenging.
The IIF underscores the need for strategic planning and risk mitigation to navigate the complex landscape of trade tensions and economic shifts in 2025.
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