EQ8MID ETF Semi-Annual Review: Navigating the Turbulent Waters of H1 2025
Welcome back to our financial blog! Today, we’re diving deep into the latest semi-annual report for the EQ8 MSCI Malaysia Islamic Dividend ETF (EQ8MID), covering the period from January 1 to June 30, 2025. For many Malaysian investors, this ETF is a popular choice for gaining exposure to Shariah-compliant, dividend-yielding companies. But how did it fare in the first half of a very challenging year?
The headline story is one of resilience in strategy but pressure on performance. While global markets saw gains, the Malaysian equity market faced significant headwinds, and the EQ8MID was not immune. The fund’s value saw a notable decline, reflecting the broader market sentiment. Let’s break down the numbers and see what’s really going on under the hood.
Core Data Highlights
Performance Under Pressure
The first half of 2025 proved to be a tough period for the Malaysian market, and this was directly reflected in the EQ8MID’s performance. The fund is designed as an Exchange-Traded Fund (ETF), which means its primary goal is to mirror the performance of its benchmark index, the MSCI Malaysia IMI Islamic High Dividend Yield 10/40 Index. True to its objective, the fund tracked its benchmark closely, but both faced downward pressure.
The Fund’s Net Asset Value (NAV) per unit decreased by 11.18% during the six-month period, falling from RM1.2378 at the start of the year to RM1.0994.
To put this in a year-on-year context, let’s compare the fund’s financial standing at the end of June 2025 with the same point in 2024.
As at 30 June 2025
Net Asset Value: RM 21.87 million
NAV per Unit: RM 1.0973
As at 30 June 2024
Net Asset Value: RM 24.13 million
NAV per Unit: RM 1.2127
The decline was largely driven by external market forces. The report highlights a turbulent period dominated by escalating US-China trade tensions and new tariffs announced by the US administration. These global uncertainties triggered significant selloffs in the Malaysian market, particularly in export-oriented and technology-linked stocks. In fact, the report notes that while global equities performed strongly, the FBM KLCI, FBM Shariah, and FBM Small Cap indices fell by 6.7%, 9.2%, and 14.8% respectively year-to-date.
Portfolio Rebalancing in a Shifting Market
In response to the changing market landscape and as part of its regular review, the fund’s benchmark index, managed by MSCI, underwent rebalancing. The fund manager adjusted the ETF’s holdings to reflect these changes. A notable shift was the increased allocation to the Telecommunication Services sector, which went from 0% at the end of 2024 to 9.2%. Conversely, exposure to Industrial Products and Services saw a significant reduction.
Sector Allocation Changes
| Sector | As at 30 Jun 2025 (%) | As at 31 Dec 2024 (%) | Change (%) |
|---|---|---|---|
| Plantation | 22.9 | 26.5 | -3.6 |
| Industrial Products and Services | 8.8 | 19.0 | -10.2 |
| Telecommunication Services | 9.2 | – | +9.2 |
| Technology | 9.4 | 4.1 | +5.3 |
| Construction | 4.8 | – | +4.8 |
This rebalancing also brought new names into the fund’s top holdings. The inclusion of Maxis Berhad was a key driver of the new allocation to the Telecommunications sector. Other significant additions during the period included Gamuda Berhad and Fraser & Neave Holdings Berhad, while stocks like Kuala Lumpur Kepong Berhad and Petronas Chemicals Group Berhad were excluded.
Top 10 Holdings as at 30 June 2025
| Stock | % of NAV |
|---|---|
| Maxis Berhad | 9.2 |
| United Plantations Berhad | 9.1 |
| Petronas Gas Berhad | 9.1 |
| Sime Darby Berhad | 7.0 |
| Fraser & Neave Holdings Berhad | 5.1 |
| Gamuda Berhad | 4.8 |
| Press Metal Aluminium Holdings Berhad | 4.7 |
| Zetrix AI Berhad | 4.7 |
| IOI Corporation Berhad | 4.7 |
| Dialog Group Berhad | 4.6 |
Risk and Prospect Analysis
Navigating Global Headwinds
Looking ahead, the market outlook remains cautious. The report emphasizes that heightened external uncertainties, particularly the ongoing tariff negotiations and the US-China trade dynamic, will continue to pose downside risks to Malaysia’s GDP growth and corporate earnings. Export-oriented sectors are especially vulnerable to these global pressures.
In contrast, domestically focused sectors are expected to show more resilience, supported by local consumption and policy measures. As the EQ8MID ETF follows a replication strategy, its performance will remain closely tied to its benchmark, which is composed of large, dividend-yielding Malaysian companies. The fate of these companies is intertwined with both domestic economic health and the global trade environment.
The fund manager’s strategy is to continue tracking the benchmark index as closely as possible. The report shows they have been successful in this, with a very low 3-year rolling tracking error of just 0.04% (against the Total Return Index), well within their 3% target. This means the fund is performing exactly as designed, even if the market it tracks is facing a downturn.
Summary and Investment Recommendations
This analysis is for informational purposes only and should not be considered as financial or investment advice. Investors should conduct their own research before making any investment decisions.
The first half of 2025 was undeniably challenging for the EQ8MID ETF, with its value declining in a tough market environment. The performance reflects the broader struggles of the Malaysian equity market, which has been heavily impacted by global trade uncertainties. However, the fund has successfully fulfilled its primary objective: to accurately track its benchmark index, demonstrating effective management and a low tracking error.
The portfolio’s rebalancing indicates a dynamic response to market conditions, with a strategic pivot towards more defensive sectors like Telecommunications. While no dividends were declared during this period, the fund’s core focus remains on Shariah-compliant companies with a history of high dividend yields.
Investors should be aware of the key risks moving forward:
- Global Trade Tensions: The ongoing US-China trade dynamic and the broader trend of rising global tariffs present a primary risk to Malaysia’s export-driven economy and, by extension, the companies within the fund.
- Market Volatility: The Malaysian market has shown a high degree of sensitivity to global news flow, which could lead to continued volatility and underperformance relative to other global markets.
- Corporate Earnings Pressure: Continued external uncertainties may negatively impact corporate earnings forecasts, potentially affecting the dividend-paying capacity of the companies in the index.
Final Thoughts
From a professional standpoint, this report paints a clear picture of an ETF performing its function correctly in a difficult economic climate. The negative returns are a reflection of the market, not a failure of the fund’s strategy. For investors in EQ8MID, this period serves as a reminder that passive, index-tracking investments are fully exposed to market downturns. The key takeaway is the fund’s close alignment with its dividend-focused, Shariah-compliant benchmark, which is exactly what it promises to deliver.
What are your thoughts on the outlook for dividend stocks in Malaysia for the second half of the year? Do you think the market will rebound, or are there more challenges ahead?
Share your opinions in the comments section below!
