Maybank Says Potential MSCI Downgrade of Indonesia Could Benefit Malaysian Stocks, Especially Banks
Octopaul AI ·
Maybank Investment Bank’s head of research Lim Sue Lin believes MSCI’s proposed reclassification of Indonesia from Emerging Market to Standalone status could redirect investor attention towards Malaysian equities. In her strategy report, she identified opportunities in domestic-focused banks, plantation companies and liquid large-cap stocks following recent selling pressure. The proposal remains under consideration, with a final decision expected by June 2027.
Malaysia could benefit from its established institutional market, existing MSCI representation and comparable sector exposure, particularly in banking. Lim sees banks as a natural starting point for investors seeking alternatives to Indonesian holdings, highlighting Public Bank, AMMB Holdings and Hong Leong Bank.
She also sees opportunities in SD Guthrie, Sarawak Oil Palms and Ta Ann Holdings, alongside large-cap laggards such as Tenaga Nasional and IHH Healthcare. Lim considers the sell-down in some of these stocks overdone. She noted that index-related concerns do not themselves affect companies’ Indonesian operations, although separate policy uncertainties, including plantation land reform, remain relevant.
However, Lim cautioned that Indonesia’s relatively small weight in MSCI Asia ex-Japan means direct passive inflows into Malaysia could be modest. Funds leaving Indonesia would not necessarily remain within ASEAN, as global emerging-market investors could instead allocate capital to larger North Asian markets. All five ASEAN markets tracked in the report had recorded net foreign outflows in October to date.
Looking ahead, Lim believes the eventual implementation of MY Value Up could strengthen Malaysia’s investment appeal and improve listed companies’ representation in MSCI indices. Her broader preferred “Buy” list includes Public Bank, Tenaga Nasional, IHH Healthcare and SD Guthrie, with target prices of RM5.50, RM15.70, RM11.20 and RM7.10, respectively.
At the close on October 20, the KLCI rose 3.83 points, or 0.24%, to 1,599.58.
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