HLIB TOP PICKS 2025...

Sturdier ship but choppier waters.

- Enter Trump 2.0. We expect heightened market volatility in 1H25 as investors grapple with the incoming policy
risks from Trump’s presidential comeback. That said, we are inclined to believe that he will take a more nuanced approach on tariffs – in a targeted manner rather than blanket – seeing that this would have an inevitable impact on inflation. Last year, Malaysia accounted for only 2.5% of US’ trade deficit (ranked 12th), while the top five countries (China, Mexico, Vietnam, Germany and Canada)
collectively made up 66%. While noting the upside bias to
Inflation from Trump’s tariff tantrums, we still expect the Fed to continue with its rate cuts by -50bp in 2025 – though this is softer than its official forecast of -100bp. With further narrowing of the FFR-OPR spread, this should provide some appreciation bias to the ringgit (our end-2025 USD-MYR target is 4.10) and local bourse (being inversely correlated to the former at -45%).

- Malaysia on a sturdier ship. External headwinds aside, perhaps it would be useful to reflect that Malaysia is now on a sturdier ship with steady growth, subsidy reforms in motion, robust investment pipeline, and a more stable political climate. We feel that foreigners have yet to fully
appreciate the country’s ongoing rejuvenation given their
continued underweight position on Malaysia, though now at a smaller quantum. The Fed’s ongoing rate down-cycle should help risk appetite for emerging markets resurface, particularly in countries such as Malaysia that aren’t in the tariff spotlight. A reprieve in foreign shareholding levels should be positive for the KLCI given the 69% correlation between the two.

- Key themes. We remain upbeat on the following
investment themes for 2025: (i) disposable income boosters, (ii) tourism shifting from recovery to record, (iii) Johor’s developmental reinvigoration, (iv) energy transition amidst a data centre boom, – while Trump’s impending presidency cold see revived interest in (v)
trade war plays.

$YTLPOWR / 6742 (YTL POWER INTERNATIONAL BHD)
$NOTION / 0083 (NOTION VTEC BERHAD)
$SMRT / 0117 (SMRT HOLDINGS BERHAD)