TA Research said it expects the FBM KLCI to rise to 1,760 points by the end of next year.
PETALING JAYA: Malaysia’s equity market is expected to build on a firmer base next year as investors looked beyond near-term volatility towards a phase of steadier expansion, analysts say.
The outlook points to measured gains rather than exuberance, with domestic demand and policy support forming the backbone of market confidence.
According to TA Research, economic growth and attractive valuations remain supportive of the market.
The research house said that it expects the FBM KLCI to rise to 1,760 points by the end of next year.
“Entering 2026, Malaysia’s equity market stands at the confluence of enduring domestic resilience and freshly energised strategic initiatives,” the research house said, anchoring its view on a maturing economic cycle.
It noted that after expanding by an estimated 4.7% this year, gross domestic product (GDP) is projected to stay resilient at between 4.3% and 4.7% in 2026, reflecting “a maturing recovery phase transitioning into stable expansion”.
Private consumption growth of 6.1%, robust capital formation and a modest current account surplus of between 1.5% and 2.5% of GDP were seen as reinforcing macro stability.
Against this backdrop, corporate earnings across the FBM KLCI universe are forecast to rise at a compounded annual growth rate of 5.3% from 2024 to 2027.
It said the earnings growth is expected to be propelled by accommodative policy measures and resilient economic fundamentals.
Meanwhile, the research house described valuations as undemanding.
Based on a 2027 price-earnings ratio (PER) of 14.5 times, slightly below the 2021 to 2025 average of 14.7 times and at minus 0.5 standard deviation to the long-term mean of 15.8 times, the research house said the valuation suggests modest upside potential, underpinned by improving earnings visibility, policy-driven liquidity, and foreign inflows, although geopolitical flare-ups and external demand shocks remain key headwinds.
TA Research noted that the FBM KLCI is on track to end this year on a firmer footing, with its year-end target set at 1,660.
The index, it said, is expected to sustain its upward momentum into next year.
Earnings growth is projected to strengthen meaningfully.
“We project FBM KLCI earnings per share growth of 6.3% next year and 6.2% in 2027, improving from 3.3% this year, compared with Bloomberg’s consensus of minus 1.3%, 7.7% and 6.3%,” the research house said, citing a strong labour market, steady external demand and mild inflation as margin tailwinds.
“Currency stability was another pillar of confidence.
“We forecast the ringgit to strengthen to RM4 against the US dollar by end-2026, averaging RM4.10 compared with the current average of RM4.29,” it said, pointing to a downside bias in US interest rates and a steady overnight policy rate of 2.75%.
The research house highlighted investment themes spanning energy transition, digital economy and infrastructure, robust consumption and tourism, fundamentally solid blue chips, and small and mid-cap growth stocks, which it said were supported by fiscal reforms and steady foreign investment inflows.
