THE Malaysian equity market looks poised to extend its gains into end-2026, with analysts maintaining bullish benchmark targets and highlighting technology, energy and domestic consumption names as preferred plays.
Stock picks such as Frontken Corp Bhd
, MI Technovation Bhd, CelcomDigi Bhd and CIMB Group Holdings Bhd remain among the counters expected to benefit from a confluence of factors affecting the market, such as shifting global supply chains, easing geopolitical tensions and improving domestic liquidity conditions.
Analysts polled by StarBiz 7 say the benchmark FBM KLCI could climb towards the 1,760 to 1,790 range by the end of next year, although they caution that bouts of volatility and profit-taking may emerge in the second half of 2026 (2H26) amid geopolitical and election-related uncertainties.
Apex Research says the recent meeting between US President Donald Trump and China’s President Xi Jinping offers temporary relief to markets, but does not fundamentally alter the strategic rivalry between the world’s two largest economies.
“The recent Trump-Xi summit signals tactical stabilisation, rather than a structural reset in US-China relations,” the research house says.
It adds that unresolved issues involving semiconductors, artificial intelligence (AI), supply chains and Taiwan continue to reinforce the broader “China Plus One” diversification trend, which favours South-East Asian manufacturing hubs including Malaysia.
“We therefore expect the broader ‘China Plus One’ diversification trend to remain intact, continuing to support Asean manufacturing and Malaysia’s technology ecosystem over the medium term,” Apex Research says.
The research house maintains its year-end FBM KLCI target at 1,787, citing stronger risk appetite, resilient domestic liquidity, and technical indicators suggesting the market is entering a new upward cycle.
Apex Research emphasises Malaysia remains strategically positioned to attract semiconductor assembly and testing activities, electrical and electronic manufacturing investments, AI infrastructure projects and data centre (DC) expansion as multinational corporations diversify operations away from concentrated China and Taiwan exposure.
In the technology space, the research house highlights Frontken as one of the more directly exposed beneficiaries of semiconductor regionalisation trends due to its links with a major Taiwanese foundry customer.
It also sees opportunities in Mi Technovation, particularly through its Senai expansion and wafer-level chip scale packaging exposure, while Vitrox Corp Bhd could benefit from rising global demand for semiconductor inspection and automation systems.
Improving momentum
Meanwhile, Hong Leong Investment Bank (HLIB) Research expects the local market to regain momentum in 2H26 as geopolitical tensions ease and US interest rates begin to decline.
“As the FBM KLCI has recovered to pre-war levels, we feel that some near-term profit taking could ensue,” the research house says.
HLIB Research retains its FBM KLCI target at 1,790, based on 15.5 times price-to-earnings valuations tied to 2026 earnings forecasts.
It says expectations for US Federal Reserve rate cuts in the fourth quarter of 2026 (4Q26) could narrow interest rate differentials and strengthen the ringgit, supporting foreign fund flows into Malaysian equities.
The research house also refreshes its top picks by adding CelcomDigi, MN Holdings Bhd and Skyworld Development Bhd, while removing several previous selections – Gamuda Bhd, Aeon Co (M) Bhd and Yenher Holdings Bhd.
Its remaining top picks include Tenaga Nasional Bhd (TNB), CIMB, IHH Healthcare Bhd, Sime Darby Plantation Bhd, Sunway Bhd, Dialog Group Bhd, Heineken Malaysia Bhd, OSK Holdings Bhd, ITMax System Bhd, Kimlun Corp Bhd, Focus Point Holdings Bhd and MCE Holdings Bhd.
Despite expectations of de-escalation in the Iran conflict, HLIB Research warns that lingering supply-chain disruptions could continue weighing on sentiment.
“The war’s resulting energy supply shock and Strait of Hormuz blockade have caused a spike in the Global Supply Chain Pressure Index – which is now at its highest point post-global financial crisis (excluding the Covid era),” it says.
HLIB Research adds elevated energy prices and supply-chain disruptions could reshape investment themes well beyond the immediate conflict period.
Among the longer-term beneficiaries identified are oil and gas service providers, such as Dayang Enterprise Holdings Bhd and Velesto Energy Bhd, supported by expectations of higher capital expenditure from Petroliam Nasional Bhd if crude oil prices remain elevated.
HLIB Research sees opportunities emerging from efforts to strengthen regional energy security, particularly for Dialog through its tank terminal exposure in Pengerang, and Wasco Bhd via pipeline-related demand.
The research house further notes that geopolitical risks in the Middle East may encourage global technology firms to diversify DC investments into Malaysia.
“We believe that Malaysia stands to benefit from the possible diversion of new DCs away from the Middle East, underpinned by the former’s established infrastructure and geopolitical neutrality,” it says.
At the same time, rising electricity fuel adjustment costs reinforce the case for renewable energy expansion and solar engineering, procurement, construction and commissioning activities under Malaysia’s energy transition plans.
GE16 factor
Separately, UOB Kay Hian (UOBKH) Research says investors may need to turn more defensive by 4Q26 as speculation over the timing of the 16th General Election (GE16) intensifies.
“Of late, there has been a rise in speculation of GE16 being held in 4Q26,” it observes, noting that this trend has become prevalent since the Iran conflict broke out.
Constitutionally, GE16 must be held by February 2028.
UOBKH Research maintains its end-2026 FBM KLCI target at 1,760 based on 15.9 times 2026 earnings, but says the market could temporarily overshoot those levels before sentiment weakens.
“We expect the Malaysian equity market to turn risk-off by 4Q26, in view of the possibilities of GE16 being held by 4Q26 and a hung parliament scenario,” UOBKH Research says.
While the research house’s base case still assumes the election takes place in 1H27, it notes that rising political speculation could limit upside momentum later next year.
UOBKH Research says investors are likely to focus on inflationary pressures linked to the Iran conflict, which could affect consumption trends and corporate earnings growth.
Unlike previous election cycles, it does not expect construction stocks to outperform significantly due to fiscal constraints and continued subsidy commitments.
Instead, the research house favours a diversified mix of defensive and structural growth names including CIMB, Fraser & Neave Holdings Bhd, KPJ Healthcare Bhd, Kuala Lumpur Kepong Bhd, MISC Bhd, Pekat Group Bhd, Press Metal Aluminium Holdings Bhd and TNB.
