According to Bloomberg-compiled data, overseas investors bought US$502.9 million (RM2.368 billion) of local shares on a net basis in May, putting the market on track for its biggest monthly inflow since March 2022.
“Malaysia is the only country in Southeast Asia to see inflows this month as a budding artificial intelligence (AI) sector and political stability lure global money,” it said.
The data reported that Malaysia is emerging as a key bet on AI in the region, given its position as a global chip supply chain hub and as tech giants invest billions of dollars in the country’s infrastructure.
“The government’s tenure past the one-and-a-half-year mark is also a welcome change after a rapid turnover of leaders, while efforts to carry out reforms help improve the outlook for the local market,” it said.
It said the recent tariff hike by the US on Chinese protective equipment also bodes well for local glovemakers.
Areca Capital Sdn Bhd CEO Danny Wong said the country is back on foreigners’ radar due to reduced political uncertainty, commodities’ advance and the prime minister has been inviting more companies to invest in AI and green energy.
“This means good times for under-owned and cheap Malaysian stocks,” he added.
The equity benchmark FTSE Bursa Malaysia KLCI Index has risen more than 10% this year, compared to a nearly 3% decline in the MSCI Asean gauge.
Analysts have projected another 7% climb in the Malaysian measure over the next 12 months, which can take it above its December 2020 peak.
“Foreign investors have recently escalated purchases of technology and transport shares,” said CIMB Securities Sdn Bhd in a note on Monday, after picking up stocks in the utilities and healthcare sectors.
Chip companies Unisem M Bhd and Inari Amertron Bhd have gained 25% and 13% this year, respectively.
“The country also offers a wider choice of AI-related stocks than other neighbours.
“Utility firm YTL Power International Bhd and power producer Tenaga Nasional Bhd are among the key beneficiaries of the growth in Asean data centres,” said CIMB.
According to a report by consulting firm Kearney, Malaysia is projected to capture about US$115 billion (RM541.79 billion) of the US$1 trillion (RM4.71 trillion) potential add to Southeast Asia’s economy by 2030 from AI adoption.
Today, Alphabet Inc-owned Google joined Microsoft Corp and Nvidia Corp in pledging billions of dollars to help Malaysia’s growing AI ambitions.
Google committed to making US$2 billion (RM9.42 billion) in investments in the country, including its first data centre and Google Cloud effort in the region.
Samsung Asset Management fund manager Alan Richardson said Malaysia is starting to carve out a niche for itself in the AI ecosystem.
“The country’s competitive advantage is its lower cost and geopolitical stability to set up infrastructure to support AI power,” he said.
To be sure, the rally this year has raised valuations for the KLCI back to its five-year average of about 14 times its one-year forward earnings estimate.
“The other gauges in the region, including in Indonesia and Vietnam, are still trading below their five-year averages,” he said.
Meanwhile, Aletheia Capital analyst Nirgunan Tiruchelvam said there is more upside for local stocks as sentiment among foreigners recovers and “political stability and AI investments will add” to the optimism.