When the overall index ends the year positively in 2024, its inevitable that certain stock components will have outperformed.
While I may remain neutral or slightly negative towards Malaysia’s equity markets in the long term, that doesn’t mean the market is un-investable.
Yes, I might have also mentioned that Malaysia could be riding on new catalysts that feel like “day-old rice” compared to other parts of the world. But hey, isn’t “day-old rice” the best rice for great fried rice?
Here are some of the sectors and stock components that have outperformed in 2024, and why they could continue to have more upside momentum.
Banking: CIMB Group Holdings Berhad (KLSE: CIMB) +35%; RHB Bank Berhad (KLSE: RHB) +16%
There are around 10 banks listed on Bursa Malaysia. A handful of them have had a great 2024, just like our Singapore banks. But within the KLCI components, none have generated better returns than CIMB and RHB.
CIMB’s meteoric share price performance was a long one in the making. Its performance has drastically improved post-COVID. It is one of the very few banks that has a sizeable presence outside Malaysia, operating in Indonesia under CIMB Niaga and in Thailand under CIMB Thai. Not to also mentioned that the diversity was one of the main delinquency concerns during the pandemic era.
With sublime performances and a dividend growth rate of +13% YoY, it is no surprise that CIMB’s share price has risen so much.
RHB has also been a solid performer, with its share price appreciating by +16%. It’s non-fund base income increased +26.4% YoY for 9M’24 versus 9M’23. Its loan growth, CASA composition, GIL ratio and cost-to-income ratio are also all on track to met its FY 2024 KPIs.
Are the other Malaysian banks un-investable? Not really. But personally, I think banks should jump out of their comfort zones to expand geographically, since the banking business is not exactly a business with wide economic moats. It is a numbers game, and both CIMB and RHB have made initiatives to grow in various regions and banking facets.
Construction: Gamuda Bhd (KLSE: GAMUDA) +93%; Sunway Bhd (KLSE: Sunway) +110%
It is difficult to fathom that shares of mature and large construction companies in Malaysia could deliver almost 100% returns in 2024 – let alone 2 companies achieving this feat.
Both Gamuda and Sunway, two of Malaysia’s largest construction companies and also KLCI components, were the outliers that pulled the KLCI index returns to 14%. The catalyst is evident and straightforward – the data centre catalyst has lifted most of the construction companies’ share prices in 2024.
Both Gamuda and Sunway have longstanding track record of developing mega projects and townships. But with no twist and new catalyst prior to data centre projects pouring in, share prices have not garnered much attention.
The data centre initiatives are a long-waited turning point for the Malaysian construction companies. And it is evident that the data centres are taking shape, with news and construction of data centres powered by hyperscalers partnering with well known listed construction companies over here.
According to a report by Cushman & Wakefield, Malaysia is the fastest growing data centre market in Asia Pacific, with an impressive percentage growth of +80%. And the growth might still have plenty of legs – Malaysia ranks top 5 in total market size, including planned, under construction and operational data centers.
This could just be the tip of the iceberg for Malaysia’s construction bull run.
Utilities: Telekom Malaysia Bhd (KLSE: TM) +16%; Tenaga Nasional Bhd (KLSE: TENAGA) +40%; YTL Corporation Bhd (KLSE: YTL) +18%; YTL Power International Bhd (KLSE: YTLPOWR)
Often overlooked as boring but vital businesses, utility stocks were part of the rage in 2024.
Especially the energy sector, where it is regulated, energy tariffs are set, which subconsciously caps the upside. So why did utility and energy stocks experience a bull run?
Energy is inevitable. To make AI smarter, it needs to be trained. And to be trained, it needs energy. Lots and lots of energy.
This is on top of the servers inside data centres that needs to store million of bytes of information, available with the click of an app or on your cloud access. And when it comes to energy supply in Malaysia, TNB is the primary entity responsible for transmission and distribution of electricity in Malaysia. They own and operate infrastructure that generates and brings electricity to homes and businesses.
And without telecommunications and internet connectivity, we wouldn’t remain connected to the world and the web 24/7. One of the largest Malaysian telecommunications company – TM, is a vital provider in broadband services data, fixed lines pay television and networks services. While it’s 2024 results is minutely improved compared to 2023, the data centre frenzy might have lifted the shares faster than its fundamentals.
As for another energy provider operating out of mostly out of Malaysia but listed on the Malaysia stock market, we have YTLPower. Singaporeans would be familiar with this company as it is one of the largest power generation companies in Singapore, and retails electricity under the Geneco brand.
YTL Bhd, being the holding company of YTL Power, rode on YTL Power’s rally last year. It is a conglomerate, with broadband services under its umbrella. With the data centre catalyst an ongoing tailwind, this might continue to float YTL’s share price as well.
A brighter prospect, but for 2025 and beyond?
It is 2025, and the Malaysian stock market continues to make headlines with data centres and even kopitams going public. While Singapore already has its fair share of data centre REITs and listed hawker chains, it definitely is painful to see one side of the market clamouring and anticipating, while the other sucking thumb on how to revive their capital market.
Having seen better-performing companies outside of Malaysia and Singapore, I can only sit back and root for good companies from both exchanges. After years of underperformances, perhaps it is fair for the Malaysia market to finally start roaring to life?
As for Singapore, well you can’t really ask for more for such a small country, when you already have 3 fantastic banks and a handful of great REITs, right?