Malaysia Emerging As Bright Spot For Investors Seeking Stability
Franklin Templeton Institute Investment Strategist Christy Tan shared with BusinessToday that the region's capacity to adapt to a shifting world order is setting the tone for a more resilient investment landscape in the second half of 2025 (2H25).
She said Malaysia, in particular, is gaining recognition for its ability to balance structural reform with economic resilience.
'The country's economy grew 4.5% year-on-year (YoY) in the second quarter of 2025 (2Q25), bolstered by robust service sector expansion (5.3%) and ongoing infrastructure development (3.8%). Notably, fiscal reforms such as the expansion of the Sales and Services Tax and the rationalisation of electricity tariffs are aimed at strengthening public finances without derailing growth.
'Malaysia is navigating external pressures with strategic domestic adjustments. Its efforts in digitisation, sustainability and special economic zones (SEZs) position it as a trade diversification hub,' Tan said to BusinessToday .
Tan shared that despite foreign investors pulling RM11 billion from Malaysian equities between January and May 2025, largely due to global trade tensions, the country's defensive, high-dividend sectors remain attractive, particularly those tied to infrastructure, digital transition and fiscal spending in areas like the Johor-Singapore SEZ.
Malaysia is navigating external pressures with strategic domestic adjustments, and its efforts in digitisation, sustainability and SEZs position it as a trade diversification hub
Asia's Adaptive Edge
Meanwhile, Tan highlighted that Asia's broader outlook is equally compelling as regional economies are realigning supply chains, deepening cross-border partnerships and accelerating digital transformation to reduce reliance on the West.
While 2Q25 GDP growth benefitted from a pre-tariff export surge, Tan cautions that momentum may taper as tariff impacts begin to weigh in the coming quarters.
'Nevertheless, India remains a top conviction play for Franklin Templeton, underpinned by resilient GDP growth, formalisation trends and a booming digital economy.
'Alternatively, Japan, bolstered by a fresh US-Japan trade deal, has seen US investors inject over US$5.6 billion into its equity markets in 1H25, a fourfold jump YoY,' Tan said.
Meanwhile, Tan also noted that emerging markets (EMs) across Asia offer a rare blend of yield, fundamentals and monetary flexibility.
'With global interest rates expected to ease, well-managed EM debt, particularly in countries with low external exposure, presents compelling opportunities.
'However, the need for selective and active management is needed given the uneven tariff effects and macro headwinds,' Tan said.
US Markets: Rally Meets Risk
While Asia offers stability, Tan shared that the US continues to present a paradox of market strength and economic fragility.
'This is evident as the S&P 500 has surged 30% from its April lows, and the Nasdaq has skyrocketed 41%, a historic rebound that has pushed valuations into stretched territory.
'The rally, however, masks underlying concerns: Inflation rebounded to 2.7% in June, and the new 15%-20% blanket tariffs on European Union imports could drive it as high as 3.3% by early 2026,' Tan said.
The leadership in US equities is to broaden beyond mega-cap tech stocks, with opportunities emerging in mid- and small-caps, value sectors and global alternatives
She then highlighted that the US federal debt has surpassed US$36 trillion, with annual interest costs breaching the US$1 trillion mark. At the same time, consumer spending is showing cracks and personal savings have dipped to just 4.5%, far below pre-pandemic norms.
'Investors need to remain cautious, not complacent, as we're entering an environment where risks are becoming more asymmetrical, whether it's inflation surprises, protectionist trade policies or fiscal strain,' said Tan.
Navigating What's Next: Diversification and Discipline
As investors look ahead, Tan shared that the key message is clear: Stay diversified, remain disciplined and don't be swayed by exuberant short-term rallies.
Tan expects the leadership in US equities to broaden beyond mega-cap tech stocks, with opportunities emerging in mid- and small-caps, value sectors and global alternatives.
But increasingly, the investment spotlight is shifting eastward.
'In a world of rising fragmentation and volatility, Asia, and Malaysia in particular, offers a compelling case for long-term and resilient growth,' Tan said, while emphasising that it's where adaptability meets opportunity. Related
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