The KLCI Index declined by 1.66% last week, reflecting cautious sentiment amid regional pullbacks.
The most significant market-moving news was the Biden administration's proposal to restrict server capacity for Tier 2 and Tier 3 nations, including Malaysia. According to The Edge Malaysia, the restrictions aim to limit AI computing power for nations like Russia and China but have broader implications for Malaysia's growing data centre sector.
Ongoing data centre projects by hyperscalers such as Google and Microsoft are expected to remain unaffected. However, future expansion pipelines could face headwinds, impacting the sector’s long-term growth prospects. Companies may need to secure "Validated End User" (VEU) status by meeting stringent U.S. security and compliance requirements to access higher computing power. Without effective mitigation, the restrictions could challenge Malaysia’s ambition to become a regional data centre hub.
In domestic news, the Johor-Singapore Special Economic Zone (JS-SEZ) agreement was officially signed last week, marking a significant milestone. The JS-SEZ will consist of nine flagship zones, each specialising in key sectors. For instance, Johor Baru City Centre will focus on finance, while Pengerang will continue as a key oil and gas hub. The government also announced a RM28 billion infrastructure fund to support the development of critical projects within the zones, aiming to bolster economic growth and attract investments.
Another notable event was the official groundbreaking of the Penang Mutiara Line Light Rail Transit (LRT) project. This RM10 billion initiative marks Penang's first rail-based transit system. Spanning 29.5 km with 21 stations, including a provisional stop at Penang South Reclamation Island-A (PSR-A), the Mutiara Line aims to enhance connectivity, stimulate high-value investments, and foster new industries. The market largely anticipated this development, resulting in muted reactions to related thematic plays.
Portfolio cash levels increased slightly last week, although we remain highly invested. We also took profits in the construction and utilities sectors to lock in gains.