PETALING JAYA: Brokerages expect the FBM KLCI to hit 1,790 to 1,810 points by end 2026, underpinned by earnings growth of 8%-9% for the year after a flattish year-on-year (y-o-y) growth in 2025.
Earnings growth in 2025 was marginal as component companies like Petronas Chemicals Group Bhd
and PPB Group Bhd suffered major losses despite the banking stocks earnings improving on higher net interest margins, lower loan loss provisions and higher than expected writebacks.
Hong Leong Investment Bank (HLIB) Research, post the recent fourth quarter 2025 (4Q25) results season, projected the local benchmark’s earnings to grow by 9.2% y-o-y in 2026, up from 7.1% previously, due to a lower-than-projected base in 2025.
It expects the growth momentum to carry into 2027 with earnings forecast to expand by 6.1%.
“Quarterly aggregate core earnings hit a post-pandemic high in 4Q25, though full year 2025 figures only grew by a mere 1% y-o-y. Key misses came from gaming, healthcare, oil and gas, and technology, while beats stemmed from banking, construction, plantation, power-infra and renewable energy.
“We now project the 2026 FBM KLCI earnings growth of 9.2% and maintain our target at 1,790 (15.5 times 2026 price earnings or PE multiple),” the research outfit stated in its latest equity strategy report.
CGS International Research is slightly more bullish on the local market, forecasting the FBM KLCI to close out 2026 at 1,810 points on the back of earnings growth of 8.5% y-o-y and a PE of 15.5 times.
“We believe the healthy results season just passed has set a healthy fundamental foundation, with fund flows the remaining piece to drive valuations.
“Key thematics we continue to favour are healthy domestic demand; improved business and investment cycle; policy certainty and reforms; healthy crude palm oil prices; and repowering the nation,” it stated.
It, however, warned the biggest risk factor to the equity earnings and valuations could come from severe disruptions in global oil movements and its implications on the global economy as a result of the ongoing conflict in the Middle East.
It stated a prolonged period of elevated energy prices and disruptions to Malaysia’s trading partners’ economies could ultimately negatively impact demand and put pressure on input costs and thus margins.
“These are unlikely to impact first half 2026 earnings, but could hit further out. For now, our view is that the impact of the hostilities is transitory.
“The stronger ringgit up till the end of February 2026 should provide margin tailwinds up till at least 3Q26”, the research house noted in its Malaysia Strategy report.
HLIB Research believes the war could actually encourage inflows into Bursa Malaysia due to its sustained economic growth prospects and issues in the regional markets.
“While the recent war erupting in the Middle East has sent shockwaves throughout markets, we retain our constructive view on Malaysia. Amid Indonesia’s MSCI and rating agency woes and Thailand’s high vulnerability to oil price shocks, we believe that Malaysia stands to benefit from a reallocation of foreign fund flows.”
