KUALA LUMPUR: Rakuten Trade has revised upward its forecast for the FTSE Bursa Malaysia KLCI (FBM KLCI) to 1,810 for the full year, from an earlier target of 1,730.
The FBM KLCI opened 2.47 points higher at 1,717.63 this morning and rose to 1721.48 at 9.05am, surpassing its previous peak of 1,719.00 recorded on Feb 26, 2019.
Rakuten Trade head of research Kenny Yee said the revised target reflects improving earnings visibility in key sectors such as banking and other high-quality contributors, supported by resilient domestic demand and favourable macroeconomic conditions.
"As global investors rebalance towards Asia, Malaysia stands out for its stable fundamentals, reasonable valuations and defensiveness amid external uncertainties,” he said.
Commenting on year-to-date (YTD) foreign fund flows, Yee said the brokerage expects a better showing this year and is hopeful of a return of funds to the region.
He noted that foreign fund flows had been disappointing, with net outflows amounting to RM22.6 billion YTD.
"In this regard, kudos to local institutions for playing a strong supporting role, as they have been instrumental in propping up the index at current levels,” he added.
Yee also observed that despite the sizeable foreign outflows, foreign shareholding remained steady at around the 19.0 per cent level.
"As such, we can affirm that more long-term foreign investors have returned, while the majority of sellers being ‘day trippers’,” he said.
"Looking ahead, we hope to see foreign shareholding improve to between 25 per cent and 30 per cent,” he added.
On the ringgit, Yee said the local currency could strengthen further against the US dollar and may even breach the 4.00 level in due course, which would be a key catalyst for equities.
"We believe the ringgit will undergo some recalibration and expect it to trend within the 3.80 to 4.00 range against the US dollar this year, on the back of a waning US economy that may prompt further rate cuts, coupled with the sell-down of US-denominated assets, particularly treasuries,” he said during the first-quarter Market Outlook Media Briefing - The Rise of Asia held here today.
On the global front, Yee said global funds are expected to continue reducing their exposure to US-denominated assets, with Asia remaining their primary destination amid evolving US economic policies.
"We expect a lower interest rate environment this year, which should be conducive for businesses and equities alike.
"Domestically, corporate Malaysia managed to stay resilient despite a tariff-laden 2025,” he added.
In its latest update, Rakuten Trade adjusted its earnings growth forecast for 2025 to 1.3 per cent following data refinements. For 2026, earnings growth is expected to improve to 7.1 per cent, driven mainly by higher forecasts for banks (1.6 per cent) and plantation companies (11.3 per cent).
On the sectoral outlook, vice-president of research Thong Pak Leng said Rakuten Trade projects a lower total industry volume (TIV) of 725,000 units for the automotive sector in 2026, amid softening consumer sentiment and persistent inflationary pressures.
"Vehicle prices could also rise following the implementation of the new Open Market Value excise duty assessments, which may push prices of locally assembled cars higher,” he said.
For banking, Thong said the sector remains one of Rakuten Trade’s preferred picks due to its strong fundamentals, including attractive dividend yields and earnings growth.
Sector earnings are expected to remain resilient in 2026, with loan growth projected at around five per cent, supported by a stable Overnight Policy Rate (OPR) of 2.75 per cent.
The outlook for the construction sector remains favourable, underpinned by sustained private sector activity in data centres, logistics and high-tech manufacturing, as well as ongoing infrastructure projects under the 13th Malaysia Plan (2026-2030), with an estimated allocation of RM430 billion.
Key projects expected to see significant progress in 2026 include the Penang LRT, the Trans-Borneo Railway, the Sungai Klang Link, the Johor Bahru Elevated Autonomous Rapid Transit system, and the Perak-Penang Water Transfer Project. - Bernama
