Malaysia’s sovereign wealth fund, Khazanah Nasional Bhd, is shifting its investment strategy towards developed markets to mitigate potential risks associated with the new Donald Trump presidency in the U.S., according to its Managing Director.
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Khazanah’s portfolio currently leans heavily towards domestic investments, comprising 59.1%, followed by North America at 15.5%. The fund’s diverse investments span various sectors, including energy, healthcare, information technology, and real estate.
At the World Economic Forum in Davos, Managing Director Amirul Feisal Wan Zahir highlighted the potential impact of the Trump administration’s policies. He anticipates opportunities in developed markets driven by potential deregulation, tax cuts, affordable energy, inflationary pressures, and a strengthened dollar. “We do need to move still into developed markets… we look at U.S., Europe and Japan. U.S. still is an attractive market,” Amirul Feisal stated in an interview with Reuters Global Markets Forum.
Navigating Challenges and Opportunities in a Shifting Global Landscape
While optimistic about developed markets, Khazanah acknowledges potential challenges in China due to Trump’s proposed tariffs on Chinese goods. However, the fund plans to maintain its investments in China, citing the country’s expanding middle class and thriving technology sector as compelling factors. China currently represents 8% of Khazanah’s portfolio. Khazanah will actively manage risks associated with these investments.
India also remains a promising market for Khazanah, with strong returns in both public and private sectors contributing to a bullish outlook. The fund sees India’s continued growth as a key driver for future investment.
Malaysia’s Resurgence Attracts Capital
Amirul Feisal expressed confidence in Malaysia’s growth trajectory, attributing it to rising foreign direct investments (FDI), a robust domestic economy, and increased household spending. He noted a significant influx of capital back into Malaysia in 2024, suggesting a renewed interest in the market.
Despite anticipated market volatility, the Malaysian government’s policies are expected to continue attracting FDI and stimulating domestic direct investments through Khazanah and the Employees Provident Fund. Malaysia’s stable currency and economic growth differentiate it from regional peers facing political and economic uncertainty, further solidifying its appeal to foreign investors.
The influx of digital investments from major tech companies like Google, Microsoft, and Oracle in 2024 bolstered Malaysia’s economic performance, exceeding market expectations in the second and third quarters. These investments also contributed to the ringgit’s strong performance, making it one of Asia’s top-performing currencies in 2024.
In conclusion, Khazanah’s strategic rebalancing towards developed markets reflects a proactive approach to navigating the evolving global investment landscape. While acknowledging potential challenges, the fund remains optimistic about opportunities in key markets and confident in Malaysia’s continued economic growth. This strategic shift underscores Khazanah’s commitment to long-term growth and stability amidst global uncertainty.
