Malaysia's economy to stay steady, ringgit-US dollar stronger at 4.100 by year-end
This will be driven by domestic fundamentals, easing monetary policy, targeted reforms and softer greenback, amid persistent external headwinds, they said.
Maybank Investment Bank Bhd (Maybank IB) chief economist Suhaimi Ilias said Malaysia is on track to achieve a lower budget deficit of 3.8 per cent of gross domestic product this year.
This follows a better-than-expected deficit of 4.1 per cent in 2024 compared to the official target of 4.3 per cent.
"The numbers so far are encouraging. Obviously, after things like the Sales and Service Tax measures effective July 1, I guess eyes are on these targeted RON95 petrol subsidy rationalisation," he said at a virtual media briefing on the 2H25 market outlook today.
Maybank IB head of FX research Saktiandi Supaat said the ringgit has been one of Asean top performers so far this year, appreciating against the greeback by about 5.25 per cent year-to-date.
"Our view is that the ringgit is around its fair value. We also project the US dollar-ringgit to strengthen towards 4.10 by the end of this year and move closer to 4.00 by mid-2026," said Saktiandi.
The investment bank flagged several key upcoming policy milestones. They include the 13th Malaysia Plan mid-term review on July 31, launch of the National Investment Incentive Framework, unveiling of the Johor-Singapore Special Economic Zone blueprint and 2026 Budget to be tabled on Oct 10.
"Of course, we need to keep monitoring the global situation, especially with the tariff uncertainties in the US. The risk is if this escalates further, we may see more volatility in global trade flows again," Suhaimi said.
"The numbers suggest the trajectory remains encouraging. The key is to keep the momentum, especially with policy support and domestic drivers in place," he added.
Bank Negara Malaysia has forecast Malaysia's economy to grow between 4.5 and 5.5 per cent in 2025, from 5.1 per cent in 2024. The GDP expanded 4.4 per cent in the first quarter of 2025.
On the equity market, Maybank IB retained its Bursa Malaysia benchmark FBM KLCI's year-end target at 1,660, anchored by improving forward earnings and several key investment themes.
Its head of equity research Lim Sue Lin said five core themes continue to drive the bank's strategy on external disruption, domestic consumption, state-driven development, investment realisation and corporate restructuring.
"As for the top stock picks, it includes Tenaga Nasional Bhd, YTL Power International Bhd, Gamuda Bhd, Public Bank Bhd, KPJ Healthcare, Farm Fresh Bhd and Solarvest Holdings Bhd, with YTL Power and Gamuda being the leading data centre plays," she said.
She added that although the broader market remained range-bound due to a lack of immediate catalysts, rising activity in infrastructure, renewable energy, and data centres had strengthened the firm's conviction in those segments.
Maybank IB maintained a "Neutral" stance on banks due to margin compression and slower loan growth expectations following the latest Overnight Policy Rate cut.
"Still, we forecast FBM KLCI earnings to grow 2.5 per cent in 2025 and 7.7 per cent in 2026, with a rebound anticipated in the banking sector next year," Lim added.
FBM KLCI slipped on Tuesday and Wednesday, erasing recent gains as global and local uncertainties cast a shadow over near-term market prospects.
The slid 13.9 points to 1,511.5 on Tuesday, being weighed down by lingering uncertainty over US-Malaysia tariff negotiations, the risks of potential US export controls on AI chip shipments to Malaysia and persistent foreign outflows.
On Thursday, the index ended 9.44 points or 0.62 per cent higher to 1,520.94.
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