Bursa Malaysia’s lack of large-cap, liquid companies makes it less attractive to foreign investors compared to regional peers, says PNB chief.
KUALA LUMPUR: The scarcity of large-capitalisation companies with sufficient liquidity is a key factor making Bursa Malaysia less appealing to foreign investors than regional markets.
Permodalan Nasional Bhd (PNB) president and group chief executive Datuk Abdul Rahman Ahmad said foreign investors favour larger, liquid firms, causing Malaysia to lose ground to North Asian markets like China, South Korea, Japan, and Taiwan.
“The challenge remains how to persuade the companies, particularly larger firms, to list on the local stock market,” he told an editors’ briefing.
He noted a positive IPO pipeline raising nearly RM30 billion from 60 listings this year.
This encouraging inflow, however, has been offset by foreign equity outflows totalling about RM20 billion year-to-date as of early December.
“What we need are larger companies, because foreign investors generally cannot invest in small firms,” Abdul Rahman said.
He urged local listed companies to improve performance through stronger returns on equity, earnings growth, and market-friendly practices to attract foreign capital.
Abdul Rahman suggested regulators emulate approaches from Japan and South Korea to drive corporate growth.
He cited Japan’s model where the Tokyo Stock Exchange applies reputational pressure on firms with low price-to-book ratios through disclosure requirements.
“South Korea has also done a similar programme. If we can adopt some of these measures, I believe it would help,” he said.
He described Malaysia’s equity market as having gone through a “lost decade” since 2014-2015, hoping such initiatives would help revitalise it.
On 2025 market performance, Abdul Rahman said global markets recovered well from an April dip, supported by AI-driven investments.
“Perhaps, we could argue that 2025 is a transient year (for Bursa Malaysia),” he said, stressing the need for better corporate performance to attract foreign funds.
Analysts are bullish on Malaysia for 2026, feeling the local bourse has bottomed out with foreign ownership at only about 18.7%.
He expects the market to benefit from Visit Malaysia 2026 tourism and strong fundamentals like economic growth.
“The Finance Ministry has projected economic growth of around 4.0 to 4.5% next year, and our in-house forecast is also at the higher end of that range,” he said.
On PNB’s portfolio, Abdul Rahman said diversification is crucial, especially when foreign markets outperform domestically.
The FBM KLCI’s year-to-date growth was -0.3%, lagging regional peers like Singapore and Indonesia, which rose over 21% and 22% respectively.
Diversification also involves expanding into other asset classes like fixed income for portfolio stability.
“Historically, our exposure to fixed income has been relatively low,” he noted.
“So diversification is a big thing for us, and we will do it judiciously,” he added.
PNB’s overseas investments currently account for about 27% of its portfolio, with 73% invested domestically.
