Kuala lumpur: The absence of large-capitalization firms with adequate liquidity is a significant challenge diminishing Bursa Malaysia's appeal to foreign investors, as noted by Permodalan Nasional Bhd (PNB).

According to BERNAMA News Agency, PNB's President and Group Chief Executive, Datuk Abdul Rahman Ahmad, highlighted that international investors typically prefer larger firms with sufficient liquidity, making Malaysia less competitive compared to North Asian markets like China, South Korea, Japan, and Taiwan. He mentioned the difficulty in persuading larger companies to list on the local stock exchange, even though there is a notable number of initial public offerings (IPOs) predominantly involving smaller companies on the ACE market.

Abdul Rahman referenced an earlier announcement by Finance Minister II Datuk Seri Amir Hamzah Azizan, which indicated a positive trend in new listings, with the IPO pipeline generating nearly RM30 billion from 60 listings in 2025. However, he noted that these gains were counterbalanced by foreign outflows from the equity market, amounting to approximately RM20 billion year-to-date as of early December 2025.

To attract foreign investors back, PNB is encouraging local listed companies to enhance their performance by delivering stronger returns on equity (ROE), earnings growth, and adopting market-friendly practices such as improving shareholder value and offering higher dividends. Abdul Rahman also suggested that local regulators could adopt approaches from Japan and South Korea to stimulate corporate growth, such as Japan's use of reputational pressure on companies with low price-to-book ratios.

Reflecting on 2025's market performance, Abdul Rahman noted that despite a downturn in April following a US tariff announcement, global markets have rebounded, driven largely by investments in artificial intelligence. Looking ahead to 2026, there is optimism for Malaysia's market, which appears to have bottomed out, with foreign ownership of the equity market at about 18.7 per cent. Economic growth projections by the Finance Ministry and PNB's in-house forecast remain positive, around 4.0 to 4.5 per cent.

In terms of PNB's investment strategy, Abdul Rahman emphasized the importance of diversifying their portfolio, especially as foreign markets continue to outperform the domestic market. With the FTSE Bursa Malaysia KLCI experiencing a year-to-date growth of -0.3 per cent, PNB is considering expanding into other asset classes, such as fixed income, to enhance portfolio resilience. Currently, PNB's overseas investments account for about 27 per cent of its portfolio, with the rest invested domestically.