Malaysia’s business cycle indicator assessment doesn’t make cheerful reading. Among eight Asian countries in our analysis, Malaysia’s overall indicator score ranks second lowest, just above Indonesia.
The profit cycle remains in a downswing. Since 2015, the return on equity for listed companies has stayed below the pre-pandemic (2013–2019) average of 10.8%. However, returns have improved for the second consecutive year, reaching just under 10% in 2023. Corporate balance sheets remain healthy, despite modest declines in cash flow and retained earnings per share. The credit cycle has yet to turn, with the two-year real cost of borrowing rising to 2.8%, exceeding the upper 2% threshold—an indication that monetary policy remains tight.
That said, Malaysia is in a stronger position than Indonesia, and we are overweight on Malaysian equities. The stabilisation of the profit cycle signals that the Malaysian business cycle is approaching a sustainable upswing. The key reason for our overweight stance this year lies in Figure 1.