PETALING JAYA: HSBC Private Bank is optimistic that Malaysia will see a solid but moderated growth this year within the Asia region.
In a statement, the bank said it forecasts a real gross domestic product growth of 4.5% in 2026, lower than the 4.9% last year.
HSBC Private Bank and Premier Wealth investment strategist Asia, Abhilash Narayan, said driving the growth will be factors like strong domestic consumption and ongoing spending on infrastructure.
“Robust domestic consumption and the ongoing spending on infrastructure and data centres, and an upswing in tourism continue to be supportive for economic growth in Malaysia in 2026,” he noted.
However, he said near-term headwinds will include elevated energy prices and the ongoing Middle East conflict.
On a plus point, Abhilash said the country’s policy responses like targeted subsidies and pricing controls will help to cushion any kind of impact, resulting in medium-term regional growth prospects remaining constructive.
As for inflation, he pointed out it had been on a gradual uptrend supported by domestic demand.
“Despite the low unemployment rate, we see limited signs of wage pressure, which should keep inflation manageable. Hence, we expect Bank Negara Malaysia (BNM) to keep interest rates unchanged at 2.75% through 2026, unless we see a sustained oil price shock,” he said.
Abhilash also noted local equities are priced at 14.8 times forward price-to-earnings ratio, broadly in-line with their five-year average.
“We look for nearly 9% earnings growth in 2026, and are neutral on equities for the next six months as growth areas such as electronics, chips and data centres have limited representation in the stock index.”
On the ringgit, he said it has been one of the best performing currencies in the region, aided by a combination of corporate forex repatriations, current account surplus and robust foreign direct investment pipeline.
“However, as a result of the recent outperformance, the ringgit screens are somewhat expensive relative to fundamentals. Hence, we hold a neutral view on the ringgit over the next six months as the pace of appreciation could slow down. We expect the US$/ringgit to edge towards RM3.85 by the end of 2026.”
Meanwhile, in its second-quarter outlook, the bank cautioned its private wealth clients against timing the market for exits and re-entries, which will increase execution and timing risks.
Rather, Abhilash said clients should focus on building portfolio resilience through broad diversification.
He also added that historically, market reactions to geopolitical events are typically temporary and often reversed over time.
“The bank also recommends its high net worth and ultra high net worth clients to consider selective allocations to hedge funds and private markets to broaden access to the opportunity set. Building resilient portfolios requires more than sectoral and geographical diversification – it highlights the role of bonds, currencies, commodities and multi-asset diversification in reducing concentration risk and improving overall stability.”
HSBC Private Bank and Premier Wealth global chief investment officer, Willem Sels said even with rapidly shifting market conditions, it was vital not to be swayed by narratives.
