KUALA LUMPUR: Rakuten Trade has revised its 2026 target for the FTSE Bursa Malaysia KLCI (FBM KLCI) downward to 1,770 from 1,800 previously, in view of the persistent market uncertainties.
Its head of research, Kenny Yee said recent political ripples may amplify market uncertainty as illustrated by the net outflow of foreign funds in May this year.
"Focus will also be on the impending state elections in Johor and Negeri Sembilan over the next one to two months,” he said in a virtual media briefing on the market outlook for the third quarter of 2026 today.
Yee said the FBM KLCI’s expansion is unlikely to have a significant impact on banking stocks, although it could improve sector diversification by allowing more technology companies to enter the benchmark index.
He said simulations show that the banking sector’s weighting in the index would decline only marginally following the proposed increase in constituent stocks.
"I think the sector weightage will be lowered by two to three per cent from the current 33 per cent to maybe 30 or 31 per cent. So, the impact from this expansion is not that apparent yet,” he said, adding that the move could enhance the benchmark’s representation of emerging sectors.
"The good thing is we will see more new sectors emerging, especially the tech sector, and I think there will be a few tech companies that will be eligible to be promoted to the KLCI when this is finalised,” he said.
On the ringgit’s performance, Yee expects the local currency to trend around the 3.80-3.90 level against the US dollar by year-end, supported by expectations that the US Federal Reserve will lower interest rates.
He is optimistic that Malaysia will remain relatively resilient compared to some regional peers amid evolving global interest rate and currency dynamics.
"I think Malaysia is very steady,” he said, adding that any recent ringgit weakness was likely driven by stronger-than-expected US labour market data that boosted the greenback on a short-term basis.
Meanwhile, Yee said the recent pullback in gold prices was driven by profit-taking, although he expects prices to remain relatively stable, noting that a stronger upward trend would likely emerge when investors unload their US-denominated assets.
On commodities, he said easing uncertainty in West Asia could lend support to prices, particularly for crude palm oil. - Bernama
