Malaysia’s Tech Stocks Showing Growth

On Bursa Malaysia, the top 7 tech names by market cap are largely made of firms in the semiconductor business, which is no surprise with the ascent of international demand.

Of the larger cap local names, Inari shares (KLSE: INARI) have gained 35% in the past 12 months, MPI (KLSE: MPI) has added 37%, and Frontken (KLSE: FRONTKN) 48%.

The demand, and the growth in local tech is increasing, but the market cap in relative terms to US counterparts, and the leading Bursa Malaysia names still leaves plenty of opportunity to expand into.

In a bid to invigorate the tech sector, the Malaysian government has unveiled various initiatives, such as a RM3 billion semiconductor fund and a RM1 billion start-up fund, aimed at fuelling innovation and growth. However, securing venture capital remains a hurdle for Malaysian tech companies, owing to a scarcity of local venture capitalists equipped with substantial capital reserves.

Malaysia's ambition to evolve into a technology powerhouse is longstanding, tracing back to the inception of the Multimedia Super Corridor in 1996. Yet, over the subsequent 30 years, progress in solidifying a tech industry of equivalent global influence to that of the US has been relatively slow. This inertia can be attributed, in part, to the dearth of investment and funding which looms over local technology companies—an impediment starkly pronounced when juxtaposed with the investment-rich environments of their global counterparts.

There is a concerted push urging Malaysian tech firms to breach international borders by exporting products and solutions—a tact advocated as a gateway to amplified revenue streams and a stronger global foothold.

Enhancing support for these ventures, agencies like the Malaysia External Trade Development Corporation (Matrade) and the Malaysia Digital Economy Corporation (MDEC) stand committed to assisting local tech companies in their international market expansion endeavours.

The breakdown of top companies in the local index gives a few clues. The top 10 listed companies on the Malaysian stock exchange paint a contrasted picture, where banks, industrial entities, and the oil and gas sector assume dominance. Blue chip stocks in Malaysia do not yet include tech.

In global financial markets, particularly those of the Nasdaq and New York Stock Exchange, technology stocks have recently hogged a lot of the spotlight. Known colloquially as the “Magnificent Seven,” this elite group includes Amazon, Apple, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla.

This group of 7, making up 1.4% of the 500 names included account for roughly 30% of the S&P 500 index's market capitalization, echoing their weight, and importance in the recent rally. Whilst investing in US stocks remains an option, the growth of the local names can be appealing.

While Malaysia's quest to emulate the overwhelming success of the American tech titans faces steep challenges, the government's encouragement and monetary support might gradually pave the way for tech companies to blossom. Many of the current tech shares on Bursa Malaysia continue to perform well, but as is the way in capital markets, firms will look to the biggest names to aspire to. Becoming a dominant sector locally will give way to more of an opportunity on a global scale, time will tell.