DAVOS, Switzerland (Reuters) - Malaysia's sovereign wealth fund Khazanah Nasional Bhd is rebalancing its portfolio to invest more in developed markets, with an eye on managing expected risks from the new Donald Trump presidency in the U.S., its top official said.

Khazanah invests heavily in Malaysia, with domestic investments amounting to 59.1% of its portfolio, followed by North America at 15.5%. The fund invests in sectors ranging from energy and healthcare to information technology and real estate, according to its website.

In an interview at the World Economic Forum's annual gathering in Davos, Khazanah Managing Director Amirul Feisal Wan Zahir said the potential for less regulation, lower taxes, cheap energy, inflationary pressures and a strong dollar, due to the Trump administration's expected policies, provided opportunities to invest in developed markets.

"We do need to move still into developed markets ... we look at U.S., Europe and Japan. U.S. still is an attractive market," Amirul Feisal told the Reuters Global Markets Forum on Monday.

Amirul Feisal, however, said Khazanah could face challenges in China. Trump, who was sworn in on Monday, has threatened to slap tariffs of 10% to 60% on Chinese goods.

Khazanah will hold its investments in China and manage its risks, as the country's growing middle-income demographic and vibrant technology sector continue to make it appealing, Amirul Feisal said. Investments in China amount to 8% of Khazanah's portfolio.

He also said Khazanah was bullish about its investments in India due to good returns in public and private markets.

CAPITAL RETURNING TO MALAYSIA 

Amirul Feisal was positive on Malaysia's growth prospects due to increasing foreign direct investments, a solid domestic economy, and higher household spending.

"Malaysia is a bit unique because it's a market people have forgotten for a while, and what we saw in 2024 was a lot more capital flowing back into Malaysia," he said.

Amirul Feisal said while market volatility is expected, the Malaysian government's policies will continue to attract FDI and drive domestic direct investments through Khazanah and the Employees Provident Fund.

Malaysia is fast becoming a haven in Southeast Asia, with foreign investors returning, as improving growth and a stable currency set it apart from peers grappling with political flux and economic uncertainty.

The country received a slew of digital investments from tech firms last year, including Alphabet's Google, Microsoft and Oracle , helping propel its economy above market expectations in the second and third quarters, and making the ringgit one of Asia's top performing currencies in 2024.

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