PETALING JAYA: The FBM KLCI has shown notable resilience despite escalating geopolitical tensions, on the country’s relatively stable domestic fundamentals and more resilient energy trade dynamics.
TA Research said the benchmark index has held steady following the outbreak of conflict in the Middle East, reflecting investor confidence even as global risks intensify.
“The resilient performance of the FBM KLCI since the outbreak of war underscores Malaysia’s ability to weather global turmoil,” it said.
However, external headwinds remain a key concern as ongoing conflicts around the world in Eastern Europe and instability in the Middle East have kept energy markets volatile.
Also, the uncertainty surrounding tariff policies in major economies continues to weigh on the global trade outlook.
TA Research noted that the potential expiry of US tariff measures in July 2026 could further complicate the outlook.
Currency risks are also building, with the Malaysian ringgit vulnerable to further weakness if geopolitical tensions persist and investors flock to the US dollar.
Any decision by the US Federal Reserve to maintain interest rates amid inflation concerns could reinforce dollar strength, the research house added.
Despite these risks, Malaysia’s domestic resilience which is supported by prudent policymaking, steady household consumption and targeted government spending continues to anchor investor sentiment.
The country’s position as a net exporter of oil and gas, driven largely by liquefied natural gas (LNG) exports, provides an additional buffer.
Still, TA Research cautioned that Malaysia’s energy profile is more delicate than it appears.
While LNG exports remain robust, declining crude oil production has turned the country into a net importer of crude petroleum, increasing reliance on Middle Eastern supply.
Looking ahead, TA Research maintained its end-2026 FBM KLCI target of 1,760, with a best-case scenario of 1,850 and a lowered downside case to 1,580.
“War-related market shocks tend to be short-lived, with equities often stabilising once investors recalibrate expectations.
The 1,760 target is premised on 14.7 times 2027 earnings, a slight discount to the five-year historical price to earnings ratio average of 14.9 times.
“We see scope for this gap to narrow once geopolitical tensions in the Middle East ease, potentially as warring nations exhaust military resources and the likelihood of peace negotiations rises.
“A shift in investor perception toward a more durable peace framework could catalyse a re-rating of Malaysian equities to our best-case target of 1,850,” it said.
The research house advises a balanced investment approach that favours defensive sectors such as utilities, healthcare and consumer staples, while identifying opportunities in renewables, oil and gas, and dividend-paying blue chips, particularly domestic-focused banks.
Moving forward, UOB Kay Hian Research said expectations for April 2026 point to a more volatile trading environment as geopolitical tensions in the Middle East continue to drive uncertainty and elevated oil prices.
The research house said prolonged military responses involving Iran have significantly lifted crude oil prices, which in turn is shaping market sentiment.
