KUALA LUMPUR: Rakuten Trade has revised its forecast for the FTSE Bursa Malaysia KLCI (FBM KLCI) slightly lower at 1,800 for 2026 from 1,810 previously in view of the overhanging uncertainty.
Rakuten Trade head of research Kenny Yee said market performance will largely depend on the duration of the US-Iran war and its impact on crude oil prices.
"Despite Donald Trump’s confidence that it will be a short run, we believe this war is going to be a long one. I expect this war will be protracted.
"How long? Nobody knows, but certainly it will not be a one or two-month war; it will be longer than that,” he said in a virtual media briefing on the second quarter of 2026 market outlook today.
Yee said that whether the US will pull the brakes remains to be seen, as the war will cost an estimated US$1 billion per day.
"If prolonged, we envisage the Brent crude to surge beyond the US$100 per barrel, which will be detrimental to global economic progress.
"As such, we believe it will be a stop/start scenario for Asian markets over the next 1-2 months,” he said.
Bursa Malaysia opened lower on Friday, tracking overnight losses on Wall Street after Iran’s new supreme leader signalled the Strait of Hormuz would remain closed.
At 9.05 am, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 10.82 points, or 0.63 per cent, to 1,700.19 from Thursday’s close of 1,711.01.
Commenting on year-to-date (YTD) foreign fund flows, Yee said the trend has been fairly solid, recording net inflows of RM1.28 billion.
"Thus far, both the local institutions and foreign funds have been doing a solid job and have been instrumental in propping up the index to current levels.
"However, looking at the retail portion, the situation remains dire with the outflows of funds continuing,” he said.
Yee also expects corporate Malaysia's earnings growth to trend higher at 7.9 per cent this year, mainly due to a lower base in 2025, while introducing a 6.5 per cent earnings growth forecast for 2027.
For 2026, he expects foreign shareholding to improve to between the 25 and 30 per cent thresholds.
"I believe the strength of the ringgit versus the US dollar would be the main catalyst to entice foreign funds back into the market.
"Looking ahead, we expect the ringgit to trend between the 3.80 and 3.90 range against the US dollar on the back of the US waning economy that may instigate more sell-down of US-denominated assets.
Regarding sector outlook, vice-president of equity research Thong Pak Leng said for the automotive sector, Rakuten Trade projects a total industry volume (TIV) of 750,000 units in 2026 amid softening consumer sentiment and persistent inflationary pressures.
"For the banking sector, we expect earnings to stay resilient with loan growth projected at around five per cent, supported by a stable overnight policy rate of 2.75 per cent and steady net interest margin of around 2.1 per cent,” he said.
In the oil and gas sector, Thong said Brent crude has spiked above US$100 per barrel, with the potential to reach US$150 per barrel if the Strait of Hormuz, which carries 20 per cent of global oil shipments, remains restricted.
"We believe companies with high operating leverage to crude prices or those providing essential storage and shipping services to be among the prime beneficiaries,” he said.
For the plantation sector, he expects crude palm oil to average RM4,500 per tonne in the second quarter of 2026, given the spike in commodity prices. - Bernama
