KUALA LUMPUR: The capital market is still performing with great resilience compared to its regional peers even after the oil market shocks, with a further 11% upside to be seen by the end of this year.
HSBC Private Bank and Premier Wealth chief investment officer for Asia Desmond Kuang said the local market’s valuations were currently in a fair range, at 15 times forward price-to-earnings, consistent with historical valuations.
“Most of the upside will probably come from earnings...energy is a key part of that,” he said at a media briefing yesterday.
He said on top of this, is the artificial intelligence (AI) space – which is another market catalyst.
Kuang noted that Malaysia was the region’s fastest growing data centre market with an annual growth rate of 45%, which he said “is quite amazing”.
Kuang said the other AI-related catalyst is on the trade side, with Malaysia being a big player in the semiconductor sector and playing a very important role in the ecosystem.
Collectively, AI, energy and security were expected to drive the next wave of investments and support economic and corporate earnings growth, he added.
That said, Kuang warned about the dynamics between foreign-exchange (forex) rates and foreign capital.
“The US Federal Reserve is appearing to be more hawkish and this would have an impact on foreign capital considerations,” he said.
Meanwhile, he noted that Malaysia’s gross domestic product (GDP) grew by 5.4% year-on-year in the first quarter (1Q), moderating from the above 6% pace recorded in the 4Q of last year.
“We think this slowdown reflects normalisation following an exceptionally strong quarter, rather than any significant loss of momentum,” he said.
HSBC is maintaining its full-year 2026 GDP growth forecast at 4.5%.
Kuang said domestic inflation had remained largely benign, aided by subsidies.
“On the external front, the ongoing Middle East conflict underscores the advantage of being a net energy exporter.
“While Malaysia remains a modest net importer of crude oil, it is a major net exporter of natural gas, positioning the country favourably in the current environment.”
Kuang said HSBC forecasts crude oil price to remain above US$70 per barrel for the rest of the year.
HSBC Private Bank and Premier Wealth global chief investment officer Willem Sels said market volatility was here to stay as global markets reacted to fast-moving risks and headlines.
He said the main thing was to remain disciplined with resilient and diversified multi-asset portfolios that could withstand short-term uncertainties, while keeping sight of longer-term opportunities emerging from structural growth trends.
In its 2026 Investment Outlook for the 3Q, HSBC Private Bank and Premier Wealth said it remained optimistic about the resilience of the global economy and expects volatility to be manageable for now.
Drawing on lessons from the Covid-19 shock and shifting international trade dynamics, the bank cited that governments and businesses have been diversifying supply chains, trade relationships and energy sources to support economic growth.
