Asia’s Rise to Drive Malaysia’s Market Momentum in Q1 2026
Asia’s Rise to Drive Malaysia’s Market Momentum in Q1 2026
19 January 2026

Asia’s Rise to Drive Malaysia’s Market Momentum in Q1 2026

Mon, Apr 6, 2026 5:33 PM

KUALA LUMPUR, 19 January 2026 – Asian equity markets are expected to regain prominence in global investor portfolios in the first quarter of 2026, as funds increasingly rebalance away from U.S. assets amid elevated valuations and ongoing geopolitical uncertainties, according to Rakuten Trade’s latest market outlook.

After several years of strong performance in U.S. equities, global investors are recalibrating risk-return expectations at current valuation levels. Despite Wall Street trading near record highs, concerns surrounding trade tariffs, rising government debt and political risks are prompting a broader reassessment of geographic exposure, with Asia emerging as a key beneficiary where earnings growth prospects remain resilient and valuations comparatively attractive.

Rakuten Trade has raised its 2026 FBM KLCI target to 1,810 points, reflecting 7.1% expected earnings growth, supported by stronger forecasts for banking (+1.6%) and plantation (+11.3%) sectors, alongside resilient domestic fundamentals.

“The rotation toward Asia is becoming increasingly visible, particularly in Hong Kong and China,” said Kenny Yee, Head of Research at Rakuten Trade. “Malaysia is well-positioned to benefit as both foreign and domestic investors prioritize markets offering earnings visibility, stability and quality fundamentals within the region.”

Foreign Flows and Market Dynamics

Foreign fund flows in Malaysia recorded net outflows of RM22.6 billion in 2025. However, foreign shareholding remained steady at approximately 19%, indicating continued participation by long-term investors even as short-term traders reduced exposure. Domestic institutional investors continued to play a stabilizing role in the market, while retail participation remained modest at around 18%, suggesting that market participation could improve with clearer catalysts and direction.

Macro Outlook

Rakuten Trade expects a lower global interest rate environment in 2026, supportive of businesses, equities, and emerging market currencies such as the ringgit. The MYR has strengthened against the USD and may approach the 4.00 level, offering an additional tailwind for local equities.

Sector and Stock Focus

Banks, Consumer, Construction, and Power & Utilities sectors are rated Overweight, supported by strong fundamentals, dividend stability, infrastructure-related growth, and rising data center demand.

Plantation, Oil & Gas, Glove, Property, REIT, Telco, and Technology sectors are maintained at Neutral, with selective opportunities driven by valuation considerations and operational improvements.

Stock Highlights

  • AMMB Holdings (1015): Rated BUY with a target price of RM6.90, based on the FY26 net profit forecast of RM2.12 billion.
  • Gamuda (5398): Rated BUY with a target price of RM6.13, supported by strong orderbook visibility, including the Marinus Link project, and FY26 net earnings of RM1.38 billion.
  • MRDIY (5296): Rated BUY with a target price of RM1.80, underpinned by continued store expansion and growth in its MyKasih network, with FY26 net profit estimated at RM711 million.
  • Tenaga (5347): Rated BUY with a target price of RM16.80, benefiting from rising data centre demand and FY26 net earnings projected at RM4.92 billion.
  • Emerging Picks (GEMS): CBH Engineering (0339), EG Industries (8907), Inta Bina (0192) and ITMAX (5309) are all rated BUY, supported by strong earnings visibility and recent strategic project wins.

Looking Ahead

Market volatility is expected to remain elevated, driven by global developments, particularly in the U.S. However, supportive policy conditions, strong domestic fundamentals, and attractive valuations in Asia provide a constructive backdrop for Malaysia and the region in Q1 2026.

“As global investors rebalance portfolios, Asia is increasingly becoming a core component of long-term asset allocation,” said Kenny Yee. “Selective exposure to regional equities offers investors a combination of growth opportunities and defensive qualities amid an uncertain global backdrop.”