The Johor-Singapore Special Economic Zone (JS-SEZ) presents a compelling narrative of regional collaboration, economic transformation, and investment opportunities. It underscores how strategic cooperation can harness complementary strengths, benefiting not only Malaysia and Singapore but also global investors who recognize its potential.
As Donald Trump returns to the U.S. presidency with Asia and trade wars on his mind, bringing the region new challenges and opportunities, Malaysia as a country and in particular the Johor-Singapore Special Economic Zone might benefit, and global investors should take notice.
The New York-listed country ETFs MSCI Singapore (EWS) and MSCI Malaysia (EWM) closed the week ended January 10th at US$21.73 and US$23.90, respectively. The Singapore ETF has an indicative dividend yield of 4.31% in US dollars, and the Malaysia ETF pays 3.81%. The Singapore stock market trades at a P/E of 12x and the Malaysia market at a P/E of 13x.
Investors old enough might recall the 2000 “Malaysia, Truly Asia” advertising campaign on CNN and global television screens. The “Malaysia, Truly Asia” ad campaign was officially launched in 2000 by Tourism Malaysia. This iconic campaign aimed to highlight Malaysia’s rich cultural diversity, natural beauty, and unique blend of Asian traditions, making it one of the most successful tourism slogans globally.
The new Johor-Singapore Special Economic Zone is five times the current size of the island state of Singapore.
The Johor-Singapore Special Economic Zone is based on the idea of Shenzhen in southern China, which borders Hong Kong. But at 3,500 sq. km, the new zone is twice Shenzhen’s size.
By combining Johor’s resources and land with Singapore’s advanced economy and connectivity, the JS-SEZ aims to become a competitive regional hub for investment, innovation, and sustainable development. Malaysia refers to this as the MADANI economy vision for sustainable and inclusive economic development.
Chinese chipmakers and technology companies from the People’s Republic of China are heading to Malaysia. Especially as President Trump is moving into the White House again, PRC companies are very keen to go outside and expand beyond their domestic market. Many of these PRC companies are now looking at relocating or expanding into Malaysia and, in particular, to the new special economic zone of Johor-Singapore Special Economic Zone (JS-SEZ).
Malaysia has been a big beneficiary over the past decade of such “China-plus-one” strategies, where multinational companies complement their Chinese operations with investments in regional countries to diversify risk and lower costs.
Shenzhen was once a poor fishing village, but today President Xi Jinping controls one of the most important economies of the world.
The Johor-Singapore Special Economic Zone (JS-SEZ) could be a game-changer for Singapore and Malaysia and indeed the wider ASEAN region. Global investors and asset allocators should take note.
Last year, 2024, Singapore followed by Malaysia were the best and second-best performing ASEAN markets, and as they say in financial markets, the trend can be an investor’s friend.
This year, Malaysia will take over the ASEAN leadership, and to paraphrase US President Trump, Singapore and Malaysia driving and working closely together could make ASEAN great again.
ASEAN could become an ever more global investment destination and consumer market.
ASEAN has a combined Gross Domestic Product (GDP) of approximately US$3.6 trillion, positioning it as the world’s fifth-largest economy, following the United States, China, Japan, and Germany.
Malaysian equities offer good dividend yields at a reasonable valuation. The Malaysian stock market traditionally has been a good market for cash dividends and equity income investing.
Singapore’s Mr. Lawrence Wong and Malaysia’s Mr. Anwar are opening a new chapter for both countries that might parallel Minister Mentor Lee Kuan Yew’s “From Third World to First: The Singapore Story.”
Mr. Lee and his compatriots from the People’s Action Party not only created DBS, the Development Bank of Singapore, but also created one of the world’s highest GDP per capita in the small island state of Singapore. By focusing on a market economy, the island succeeded in selling lower-cost social housing for one million dollars.
The year 2026 holds a special place in the heart of many Malaysians as the nation reflects on and celebrates all its successes and challenges in transforming a once colonial land into a thriving, multicultural, and dynamic country.
The Malaysia-Singapore Special Economic Zone is unique and could be a marriage made in heaven.
Mr. Lee Kuan Yew from Singapore and Mr. Tun Mohammed Mahathir from Malaysia were contemporaries in their respective nation-building efforts. Now, with the new leadership in both KL and Singapore, more cooperation for the strategic benefit of both countries is being implemented.
Singapore and Malaysia have a relationship “unlike any other,” with a rich history and deep interdependency. Bilateral trade has been on the rise, and investment flows remain robust.
According to Singapore’s Trade and Industry Ministry, Malaysia was Singapore’s third-largest trading partner in 2023, with bilateral trade of US$92.1 billion. Singapore was also Malaysia’s largest source of foreign investment, contributing US$9.6 billion or 23.2% of Malaysia’s total foreign investments in 2023.
The KLCI has a lower correlation with developed markets like the U.S. and Europe, making it a potential diversifier in global portfolios.
In 2025, Malaysian companies that rely more on domestically-driven growth and less on export markets might outperform in well-diversified portfolios.
Research houses are predicting 2025 to be another strong year for the ringgit and Bursa Malaysia, with the ringgit holding steady and the Bursa Malaysia showing promising growth.
The 2025 first quarter (1Q) most probably will contain the element of wait-and-see, as a cautious ASEAN stock market recently reflects the uncertainty on how tariff threats will play out, compounded with higher United States (US) policy rate expectations. These two conditions resemble 2018, but this time, Malaysia is better placed in terms of its fundamentals amid structural themes and has been relatively insulated.
As the world’s sixth-largest semiconductor exporter, Malaysia holds 7% of the global market in the semiconductor industry and contributes to 23% of American semiconductor trade, a fact that is not widely known or appreciated by global investors yet.
The Malaysian stock market and the local currency MYR (Malaysian ringgit) have underperformed and have been out of favor with Asia-based and global investors for several years.
Maybank, CIMB, and Public Bank’s loan growth, hovering around the mid-single digits, could gain momentum through 2025 with the development of the Johor-Singapore Special Economic Zone and as the Malaysian government’s new industrial and economic plan gains pace.
Malaysia’s equity market is expected to remain robust in 2025, driven by an estimated 8% corporate earnings growth, government initiatives such as the Johor-Singapore Special Economic Zone and the energy transition blueprint. Other catalysts include strong domestic liquidity, IPO pipelines, merger and acquisition activities, and potential corporate value-up initiatives aimed at enhancing shareholder value.
The FTSE Bursa Malaysia KLCI (KLCI), a benchmark index representing the Malaysian equity market, plays a nuanced role in global asset allocation. While its overall weight in global equity indices is modest due to Malaysia’s relatively small economic size compared to global giants, it offers specific advantages for investors seeking diversification, stability, and exposure to Southeast Asian markets.
The KLCI is heavily weighted toward financials, plantation (palm oil), and energy sectors, reflecting Malaysia’s economic structure. This composition can provide exposure to commodities and resources, which may appeal to investors looking for inflation hedges or commodity-linked growth.
Stability and Yield:
Malaysian equities are considered relatively stable, partly due to strong regulatory frameworks and the dominance of large-cap blue-chip companies. The Malaysian stock market often attracts income-focused investors with its historically attractive dividend yields compared to developed markets.
Correlation and Diversification:
The KLCI has a lower correlation with developed markets like the U.S. and Europe, making it a potential diversifier in global portfolios. However, it tends to have higher correlations with other emerging Asian markets, particularly those in ASEAN.
Foreign Investment Dynamics:
Foreign ownership in Malaysian equities has declined in recent years, reflecting global shifts in emerging market allocations and competition from larger regional markets like China and India. Currency stability and geopolitical risks also influence foreign investor appetite for KLCI-linked assets.
Challenges and Opportunities:
Challenges: Malaysia faces competition from other emerging markets for foreign capital, and the KLCI’s relatively slow growth trajectory may deter growth-oriented investors.
Opportunities: The index benefits from Malaysia’s strategic location in ASEAN, strong trade ties, and ongoing infrastructure development initiatives, which could spur future growth.
KLCI’s Role in Asset Allocation:
For global asset allocators, Malaysia’s KLCI is most relevant for:
- Emerging Market Exposure: It provides an entry point into Southeast Asia’s growing economies, albeit with less volatility than some of its peers.
- Diversification: It offers unique sectoral exposure, especially in commodities and finance.
- Defensive Positioning: Its stable returns and dividend potential make it a suitable choice for more conservative strategies.
While the KLCI may not dominate global portfolios, it holds niche value for strategic diversification, regional growth opportunities, and stability-focused investments. Malaysia’s participation in multiple unilateral trade agreements could attract more investors to the country and benefit other ASEAN nations.
Johor-Singapore Special Economic Zone (JS-SEZ): This initiative aims to strengthen the value proposition of both regions by:
- Improving cross-border goods connectivity: Streamlining customs procedures and enhancing infrastructure to facilitate smoother trade.
- Enabling freer movement of people: Implementing measures such as passport-free QR code clearance at land checkpoints to reduce congestion and ease travel.
- Strengthening the business ecosystem: Offering tax incentives, establishing one-stop facilitation centres, and promoting cooperation in sectors like manufacturing, logistics, the digital economy, and renewable energy.
The JS-SEZ is expected to create 20,000 skilled jobs and attract 50 projects within its first five years, contributing to economic growth and development in both regions.
For Singapore, the JS-SEZ provides access to additional land and resources, enabling businesses to expand operations and tap into Johor’s workforce and industrial capabilities.
For Malaysia, particularly Johor, the collaboration attracts foreign direct investment, boosts employment, and enhances infrastructure development, leveraging Singapore’s advanced economy and global connectivity.
The SG-Johor historic partnership exemplifies a strategic move to harness the complementary strengths of both Singapore and Malaysia, fostering a competitive and integrated economic zone that benefits both nations and most probably will provide and create attractive investment returns to investors willing to listen and explore these opportunities.
The establishment of the Johor-Singapore Special Economic Zone (JS-SEZ) is poised to benefit several companies and sectors in both Singapore and Malaysia. Here are some key players expected to gain from this development:
Singaporean Companies:
- Singtel: In collaboration with Telekom Malaysia, Singtel plans to develop data centres in Johor, enhancing its regional data infrastructure.
- Banks: Financial institutions like OCBC and UOB, with significant operations in both Singapore and Malaysia, are well-positioned to facilitate increased cross-border trade and investment.
- Technology Manufacturers: Companies such as AEM, Frencken, UMS, and Venture, which have existing manufacturing facilities in Malaysia, may benefit from potential tax incentives and the expansion opportunities presented by the JS-SEZ.
- Sembcorp Industries: With a focus on renewable energy, Sembcorp could play a significant role in the green initiatives within the economic zone.
Malaysian Companies:
- YTL Power International Bhd: YTL Power is set to develop data centres in Johor, capitalizing on the region’s growth as a data hub.
- UEM Sunrise Berhad: As one of Malaysia’s largest property developers with projects in Johor, UEM Sunrise stands to benefit from increased demand for real estate and infrastructure development in the SEZ.
- Sunway Bhd: With a strong track record in township development, Sunway could be instrumental in building new communities and commercial spaces within the SEZ.
- IJM Corporation Berhad: Specializing in large-scale infrastructure projects, IJM may secure contracts related to the construction and development within the economic zone.
- Itmax System Berhad: Focusing on smart city solutions, Itmax could contribute to the technological infrastructure of the SEZ, enhancing its appeal as a modern economic hub.
The Johor-Singapore economic zone investment theme might become “consensus” and might get promoted by both Singapore and Malaysia banks, but always remember: just because it is consensus does not necessarily make it wrong.
Investing in the Johor-Singapore Special Economic Zone (JS-SEZ) carries inherent risks and uncertainties. Investors are encouraged to conduct thorough due diligence, seek professional financial advice, and carefully assess their risk tolerance before committing capital to opportunities within the JS-SEZ.
In the final analysis, and in the words of a Chinese proverb, “Fortune favours the bold and the prepared mind.”
Rainer Michael Preiss, Partner & Portfolio Strategist at Das Family Office in Singapore
Partner & Portfolio Strategist — [email protected]
Rainer Michael Preiss is a German national and an investment advisor based in Singapore. He has over 25 years of experience in global private banking and multi-family office business across Europe, Middle East, Africa and Asia. Michael was previously the Chief Equity Strategist at Standard Chartered Bank (SCB) where he was one of seven voting members on the Global Investment Council which decided on SCB’s global investment policy. He is also a prolific and renowned contributor to the financial media world where he is a columnist for Forbes and is frequently featured on Bloomberg, CNA and CNBC.
