Monday, 24 March 2025
Written by MYTHEO
‍

Key Takeaways
‍

• Malaysian tech stocks have plunged 22.17% in just two months, far outpacing global declines. Investors need to reconsider their exposure to local tech stocks.
• Malaysian tech stocks are not only underperforming but also more volatile than US small-cap stocks. With a staggering 25.7% volatility, the risks are higher than many assume.
• Diversification beyond Malaysia is no longer an option—it’s a necessity. Digital investment platforms like MYTHEO provide a smarter, lower-risk way to access global opportunities.

The Malaysian stock market had a rough start to 2025, with the Kuala Lumpur Composite Index (FBMKLCI) tumbling 4.12% in the first two months of the year. A sharp 5.20% decline in January set the tone for a turbulent period, though a mild rebound in February helped limit further losses. However, the biggest shock came from the tech sector, which suffered a staggering selloff that rattled investors.
‍
Malaysian technology stocks have long been seen as a gateway to high growth and outsized returns. However, the first two months of 2025 shattered those expectations. The FBM Technology Index plunged 10.43% in January, followed by an even steeper 13.06% drop in February. This brought the total decline to a jaw-dropping 22.17%, far worse than the broader market’s drop.

The downturn in Malaysian tech stocks was not an isolated event. Global market turbulence, triggered by external shocks, played a major role. President Trump’s renewed tariff threats reignited investor anxiety, while troubling economic data from the US added to the pessimism. Inflation in the US surged past 3.0% again, and an S&P Global report revealed that the US service sector—the largest component of the American economy—had slipped into contraction. These factors fuelled uncertainty worldwide, leading investors to pull back from riskier assets, particularly in emerging markets like Malaysia.

Yet, when comparing the selloff in Malaysia to global markets, the disparity is striking. The US stock market remained relatively resilient despite these headwinds. The S&P 500 managed to gain 1.24% in the first two months of the year, while the Nasdaq Composite—a tech-heavy index—saw only a modest 2.40% decline. Even the Russell 2000 Index, which tracks small-cap stocks often considered highly volatile, dipped just 3.01%.
‍
Our research, based on 20 years of market data, highlights a concerning trend: Malaysian tech stocks have consistently underperformed their global counterparts. The sector has delivered an average annual return of just 1.2%, significantly lagging behind the broader FBMKLCI’s 2.8% return. Meanwhile, US markets have thrived, with the S&P 500 generating an 8.3% annual return and the Nasdaq soaring at an impressive 11.7%. Even the riskier Russell 2000 has outperformed, delivering a solid 6.3% annualized return.

Beyond returns, risk is another critical factor investors must consider. We analysed risk using standard deviation, a commonly used measure of the volatility of financial instruments. Malaysian tech stocks exhibit alarming volatility, with a standard deviation of 25.7%—more than twice that of the broader Malaysian market (11.8%). Surprisingly, they are even riskier than US small-cap stocks, which are typically known for their volatility. For reference, the S&P 500’s volatility stands at 15%, the Nasdaq Composite at 17.8%, and the Russell 2000 at 20.2%. This means Malaysian investors are taking on significantly more risk while receiving far lower returns.

Chart 1: Annualized Return and Risks of Malaysian and US Indices for the Past 20 Years (March 2005 to February 2025)

Source: Gax MD, March 2025
Based on the study of respective index performance covering 20 years period from March 2005 to February 2025.
Note: Past performance is not an indication of future performance

However, there is a way for investors to navigate this uncertainty. Despite ongoing market turbulence, a well-structured, globally diversified investment strategy can provide stability. Take the MYTHEO Growth portfolio—despite its significant exposure to tech, particularly US tech giants, it shrugged off February’s market volatility to deliver solid gains.

Beyond the Growth portfolio, MYTHEO’s other strategies, such as the Income and Inflation Hedge portfolios, performed even better. The Income portfolio benefited from a flight to safety, as heightened market uncertainty drove increased demand for US Treasuries and high-quality corporate bonds. Meanwhile, the Inflation Hedge portfolio rose by 3.50%, supported by strong gains in safe-haven assets like gold and inflation-protected bonds, alongside real estate investments that typically thrive in an inflationary environment.

Chart 2: MYTHEO’s Portfolio Return in Feb 2025 (MYR)

Source: Gax MD, March 2025
Note: Past performance is not an indication of future performance
Balanced allocation consists of 30% Growth, 47% Income and 23% Inflation Hedge

Many investors believe that diversifying beyond the local market means taking on additional risk, but that is not necessarily the case. In fact, today’s digital investment platforms, like MYTHEO, offer Malaysian investors seamless access to global opportunities while managing risk more effectively.

By strategically diversifying across different regions and investment themes, investors can build resilience even in turbulent times. MYTHEO has demonstrated how intelligent asset allocation can lead to stability where others falter. For investors looking to weather unpredictable market conditions, a diversified approach may be the key to long-term success. With platforms like MYTHEO making global investing more accessible than ever, Malaysian investors now have a smarter way to grow their wealth—without taking on unnecessary risk.

This material is subject to MYTHEO’s Notice and Disclaimer.