PETALING JAYA: Long bets appear to be visible on sectors that are exposed to the data centre infrastructure and commodity sectors ahead of the upcoming first-quarter (1Q26) results reporting season.
A deluge of financial reporting is expected from companies which have their quarters ended March 31, 2026, in the weeks ahead.
The heavily subdued sentiment on Bursa Malaysia since end-February on fears of the developing war in Iran appears to have given way to hungry bargain hunters now.
This is seen as the FBM KLCI has added some 5% since the beginning of March, when the index dropped to a wartime low of 1,664.07 points from the initial reaction as the war broke out.
For FBM KLCI index constituents, recent strength was primarily driven by construction/infrastructure and commodity plays, while the financial services sector appears to have taken a breather.
Among index-linked stocks that have seen a strong run-up, valuation bargains include YTL Corp Bhd
(with a 29% rise since March 2), YTL Power International Bhd (a 50% gain), Press Metal Aluminium Holdings Bhd (a 22% increase) and Petronas Chemicals Group Bhd (a 73% rise).
Market technicians agree that the FBM KLCI could retest the year-to-date high of 1,771.25 that was set in January in the days and weeks ahead, although this would also depend upon how the US markets perform.
The equity markets in the United States have been holding up well and setting records in recent days in spite of continued concerns over the ongoing war in Iran.
In its recent commentary, BlackRock Inc explained the key reason behind US stocks’ outperformance is the strong corporate earnings that are being revised higher.
“Mega-cap tech remains the dominant driver, while broad earnings growth looks healthy in a still resilient US economy.
“Artificial intelligence (AI) is now delivering tangible revenues, allaying worries over outsized capital spending.
“We’re ‘overweight’ on US and emerging market stocks on the accelerating AI buildout as a result,” it said.
Asset management firm Tradeview Capital’s portfolio manager Neoh Jia Man explains these price movements on the FBM KLCI.
“Given the elevated energy and commodity price environment, the oil and gas and plantation sectors are poised to deliver strong earnings growth in the upcoming results season, supported by firm crude oil and crude palm oil prices.
“However, both sectors remain highly sensitive to commodity price volatility, with a potential normalisation in global energy supply which may pose a key downside risk to earnings momentum here,” Neoh told StarBiz.
Neoh said the technology sector is expected to benefit from improved pricing power amid lingering supply tightness in select components, alongside a more favourable foreign exchange environment in 1Q26.
“That said, the sector’s valuation outlook could face pressure from a potential shift in interest rate expectations, particularly if inflation remains elevated,” he noted.
Neoh said the construction and property development sectors are also anticipated to come under pressure from escalating cost inflation, driven by higher fuel, building material, and labour expenses.
“Earnings outlook here may remain subdued due to slower-than-expected infrastructure project rollouts and persistent affordability constraints affecting property demand.
“Nonetheless, potential upside catalysts include stronger demand from data centre-related developments and an acceleration in government project implementation ahead of the general election,” Neoh said.
Neoh said he remains cautious on the tourism sector due to rising fuel costs and potential disruptions stemming from geopolitical tensions in the Middle East.
“Despite this, 1Q26 earnings are likely to remain resilient, underpinned by continued growth in tourist arrivals during the quarter,” he said.
Meanwhile, Neoh said the consumer discretionary sector is expected to face headwinds from softer consumer spending, intensifying competition from foreign entrants and mounting cost pressures.
“Also, rising inflation is likely to further weigh on consumer sentiment and margins in the coming quarters,” he noted.
BIMB Research director of research Mohd Redza Abdul Rahman believes the coming results season could be a rather muted affair, considering the sentiments surrounding the global geopolitical situation.
“I anticipate the 1Q26 earnings season will be largely characterised by a ‘neutral’ or ‘inline’ performance across most major sectors.
“Traditional heavyweights like banking, property, and real estate investment trusts are expected to remain stable, supported by decent asset quality, steady progress billings, and resilient occupancy rates,” Mohd Redza said.
The banking sector may face slight margin compression, and the property sector relies heavily on affordable housing demand; but the overall sentiment remains defensive and grounded by a supportive interest rate environment.
But while sentiment is muted in many places, Mohd Redza said growth stories are potentially emerging in the healthcare, rubber glove and utilities sectors.
“Healthcare is poised for potential positive surprises through improved operational efficiency, while the utilities sector, led by Tenaga Nasional Bhd and Solarvest Holdings Bhd, is benefiting from regulated business revenue and active order book execution.
“Notably, the rubber gloves sector is the only one expected to perform above expectations, though analysts warn this is a tactical spike driven by ‘panic ordering’ and front-loading rather than a permanent structural recovery in demand,” Mohd Redza said.
Conversely, he said several other sectors are grappling with external headwinds and seasonal shifts.
“Plantation and technology are facing cyclical weakness and supply chain disruptions, with the latter seeing a divergence between struggling electronics manufacturing services players and high-performing blockchain and data centre-linked firms.
Mohd Redza also points out that the telecommunication company (telco) and transport sectors face the most significant downside risks; telcos are navigating the costly aftermath of Digital Nasional Bhd’s equity restructuring, while airlines are being squeezed by a sharp spike in global oil prices.
