Should You Invest In EV Shares In Malaysia?

Electric vehicles (EVs) is one of the main industry that Malaysia is pushing for, to achieve net-zero carbon emission as part of the sustainability movement under the 12th Malaysia Plan.

The EV industry continues to grow as the Malaysia Investment Development Authority (MIDA) aims to have RM20 billion in investments by 2025 and the Ministry of International Trade and Industry (MITI) recently approved a local company for an EV manufacturing license.

And of course, Tesla’s official arrival further solidifies Malaysia’s fast trajectory towards becoming an EV powerhouse in South East Asia.

But what does all of this mean for you, the investor?

For investors, all these positive developments surrounding EVs both locally and globally mean that the market outlook for investing in EVs has changed significantly.

Recently, Rakuten Trade’s Chief Executive Officer, Kazumasa Mise and Head of Equity Sales, Vincent Lau, shared their experts insights on how the EV movement has sparked an interest in EV shares among investors.

Kazumasa Mise, Chief Executive Officer, Rakuten Trade

Given the news surrounding the EV theme lately, do you see interest in trading EV-related shares?

All eyes are on the EV space, driven especially by the ongoing news and developments, both locally and internationally. Closer to home, we have observed heightened trading activity in shares such as EP Manufacturing Bhd (EPMB) after they secured approval for EV manufacturing license from MITI.

For US x EV-related shares, Tesla (TSLA), Rivian Automotive (RIVN) and NIO, are consistently traded by Rakuten Trade clients, month on month.

Tesla (TSLA) as an example, in 2023, have noted variations in the number of traders interested in the stock due to its significant surge of nearly 150%. In recent weeks, Tesla’s popularity among Rakuten Trade clients has experienced a consistent upward trajectory, largely attributed to the excitement surrounding Elon Musk’s announcement of the new venture xAI.

Why do you think the traders are keen on trading EV shares?

Given the current news and trends surrounding electric vehicles (EVs) both locally and internationally, it comes as no surprise that our clients have been actively trading in the EV theme across both the Bursa, US and Hong Kong markets.

Investing in EV shares is seen to support sustainable investing, as it promotes cleaner transportation alternatives and reduces dependence on fossil fuels. This resonance between personal values and investment choices that can significantly impact the satisfaction of millennials, who actively seek investments that align with their beliefs.

Rakuten Trade clients are also highly responsive to earnings announcements from EV companies and what’s trending in the news. Anticipating a similar pattern, our clients are keenly awaiting Tesla’s quarterly earnings announcement on 19 July and its subsequent expansion into the Malaysian market, scheduled for 20 July.

Could you tell us more about the demographics of traders trading EV shares?

Based on recent data (as of 30 June 2023), investors who trade Bursa EV shares tend to adopt a short-term investing strategy, suggesting a higher risk appetite while US traders typically choose to debut by trading EV stocks and tend to have a buy-and-hold strategy on them.

For example, Tesla has maintained its position as the top-traded stock for seven consecutive months in 2023 and is the top debut traded stock by Rakuten Trade clients.

Given the popularity of US stock trading lately, how do you educate investors who are first-time investing in the US market?

Increasing financial literacy is the key to smart investing. Reading articles from newspapers, and online news portals like Yahoo Finance or Motley Fool (ideal for beginners) can be your starting point to get news on familiar brands.

In view of Tesla’s upwardly market performance this year of almost 150% and its launch in Malaysia this week, Rakuten Trade has launched its Tesla Share Giveaway Campaign that will reward clients who debut trade on NYSE /NASDAQ between July 20 to July 21. Clients that make their first debut on the US markets will be rewarded 0.01 unit of Tesla shares.

Do you think the recent bull run in the US stock market will shift local investors’ focus from the local market to the US?

Our clients, like all other digital investors, are always attentive to market trends and opportunities.

While the recent bull run in the US stock market has been attracting their attention, it is important to note that their focus is not exclusively limited to a single market or sector. They are quick to adapt their investment strategies based on where they perceive opportunities to arise.

Ultimately, it is the pursuit of profitable investments that drives our clients. They will actively evaluate and seize opportunities in both local and international markets based on their research and analysis. The recent focus on the US market should not be seen as a permanent shift but rather as a reflection of its current market conditions.

Vincent Lau, Head of Equity Sales, Rakuten Trade

What is the sector outlook in Malaysia, considering the launch of Tesla, the approval of an EV manufacturing license from MITI, and the meeting between the Prime Minister and Elon Musk?

The EV sector in Malaysia has a bright outlook and is expected to experience strong growth due to government incentives and increasing ESG awareness aimed at reducing carbon footprints.

Recent developments in the Malaysian EV sector are significantly shaping its growth prospects. Notably, Tesla’s decision to establish a sales and service center in Malaysia, a first without the need for Approved Permits (AP), highlights the country’s attractiveness.

Which companies are actively involved in the EV industry?

BYD’s partnership with Sime Darby to distribute EV cars further emphasizes the Momentum.

Moreover, EP Manufacturing Bhd‘s attainment of MITI approval to manufacture EV vehicles is a monumental achievement, serving as a game changer for both the company and the overall EV landscape in Malaysia. It is worth mentioning that this trend extends beyond conventional automotive manufacturers, as even renowned ultra-luxury and sports car brands like Lamborghini, Bentley, and Ferrari are embracing EV technology.

The EV charging space is seeing more installed chargers by major players including Petronas Gentari, Tenaga Nasional Bhd, locally listed corporates Yinson Holdings Bhd, ACO Group Bhd, Amtel Holdings Bhd, Pestech International Bhd are helping to speed up the adoption and the ecosystem needed for EV.

If EVs were to capture a significant market share, how would this impact local car producers such as DRBHCOM, UMW, and Pecca? Do you foresee these local players diversifying into EV production in the near future?

While the EV industry is experiencing tremendous growth, the current numbers remain relatively small, resulting in limited impact on local car producers. However, it’s noteworthy that local car manufacturers are also actively involved in distributing EV cars.

What investors should be looking for if they are keen to own EV shares?

In 2022, EV sales in Malaysia amounted to 2,631 units. Fitch Solutions has forecasted an expected increase in EV sales to reach 5,850 units by 2023. It is important to note that this figure should be considered in the context of the total industry volume, which stood at 720,000 units for car sales in 2022.