PETALING JAYA: Malaysia’s stock market is poised for a steady second half of 2026 (2H26), supported by solid domestic economic fundamentals even as persistent global headwinds cap rapid gains.
According to RHB Research, the benchmark FBM KLCI is on track to hit 1,750 points by end-2026, reflecting a market that is fundamentally sound but likely to trade within a tight, range-bound band.
While external pressures will prevent sharp surges, strong corporate earnings and abundant domestic market liquidity are expected to form a solid floor against major pullbacks.
The market's cautious stance follows a turbulent first half.
Data from TA Securities shows the FBM KLCI ended June 2026 at 1,664.06 points, down roughly 1.1% month-on-month and 1% year-to-date, though it remains 8.6% higher year-on-year.
After charging to a year-high of 1,771.25 on Jan 27, sentiment deteriorated sharply following military escalation between the US, Israel, and Iran in late February, which briefly threatened the Strait of Hormuz.
The index hit a low of 1,664.07 in early March before attempting a partial recovery in April and May. However, the failure of peace talks and domestic political headlines kept momentum subdued through June.
Against this backdrop, RHB Research advises investors to adopt a "buy-on-weakness" strategy, anchoring portfolios in defensive sectors such as healthcare, consumer goods, energy, plantations, real estate investment trusts, and telecommunications, while holding "overweight" positions in growth areas like banking, property, construction, and technology.
However, private fund managers are taking a more surgical approach.
"We would overweight semiconductors and oil and gas (O&G), while underweighting telecommunications and plantations. The AI boom has propelled the semiconductor industry into a structural supercycle, driving sustained investment across AI infrastructure," explained Areca Capital chief executive officer Danny Wong.
Wong highlighted O&G as a tactical contrarian pick: "Rising geopolitical tensions have reinforced the importance of energy security, prompting renewed upstream capital expenditure after years of underinvestment. Furthermore, many O&G counters are trading at depressed valuations."
Former senior investment banker and high-net-worth investor Ian Yoong Kah Yin pointed to the persistent gap between Malaysia's economic health and stock market valuations.
"The big plus is that the Malaysian economy is sound, and it is one of the most competitive globally, recording our biggest trade surplus ever. With the exception of semiconductors and plantations, many shares on Bursa remain undervalued," Yoong noted.
Yet, despite strong macroeconomic indicators such as gross domestic product expanding at 5.8% in the second quarter of 2026, Yoong observed that economic momentum has failed to trigger a broader equity rally: “It’s like we held a party and no one came.”
