Malaysia stocks ride high as AI building boom fuels longest rally in 13 years

Builder Gamuda and utility conglomerate YTL Power have doubled their stock prices in less than a year. Electricity utility Tenaga Nasional’s shares are up 45 per cent since December, and foreign money managers are turning buyers in a bet that the market has much further to run.

Analysts see builders, power suppliers and tech companies gaining most from foreign investment into the Southeast Asian country.

“I think Malaysia is definitely a sweet spot at the moment because we offer water, power and the connectivity is there,” said Ernest Chew, Asean portfolio manager at BNP Paribas Asset Management in Kuala Lumpur, who has been buying Malaysian stocks.

“Operating a data centre is not a new thing to Malaysia … it’s just that now we see a [generative-]AI boom, a data centre boom they basically accelerate [foreign direct investment] … that’s why we see minimal risk.”

Foreign direct investment tends to be lumpy but hit 188.4 billion ringgit (US$40 billion) last year according to the Malaysian Investment Development Authority, close to the record 208.6 billion drawn in 2021.

To be sure, foreign flow into equities has not yet materialised. HSBC analysis shows a US$150 million net outflow from Malaysian stocks over 2024 to June 26 and both Asia-focused and global emerging market funds are underweight on the country.

But with these sectors driving the momentum and deepening liquidity – average daily turnover is nearly double what it was a year ago – there is growing confidence from foreign investors about the market’s outlook.

“Investors are warming up to Malaysia,” said Tushar Mohata, head of Malaysia equity research at Nomura. “We don’t think valuations are overheated now, so we think this rally should continue.”

One measure of value,