KUALA LUMPUR (Sept 3): With the earnings season wrapping up better than feared, analysts are lifting their outlook for Corporate Malaysia amid optimism that the worst may now be over.

At least four research houses — CIMB Securities, RHB Research, CGS International and UOB Kay Hian — raised their year-end forecasts for the FBM KLCI while others lifted target prices for the stocks in the benchmark index, pointing to higher valuations from fading concerns over US tariffs.

“We believe the domestic market’s relative underperformance in 2025 has priced in much of the risks,” RHB Research said in a strategy note.

The research house raised its target for the KLCI by 20 points to 1,620 points, citing support from fiscal and monetary measures, stronger ringgit and investment inflows as well as robust domestic liquidity conditions and improved clarity on US tariffs.

The KLCI’s target price, based on the bottom-up method that adds the consensus target price of each component stock and weights them, has been increased to 1,767 points post-results from 1,751 points three months ago, according to Bloomberg’s data.

The 30-stock benchmark index has climbed nearly 13% from its April lows at the height of the global tariff turmoil, cutting the year-to-date decline to about 3%.

For CIMB Securities, the latest results season was “slightly positive” with an increase in the number of companies outperforming expectations despite broad-based underperformance that resulted in lower aggregate earnings forecasts.

Among companies under the research house’s coverage, the biggest drivers of the earnings decline were Petronas Chemicals Group Bhd (KL:PCHEM) as well as contraction in the utilities sector.

On a year-on-year basis, the real estate investment trusts, plantation, transport, and gaming sectors reported profit growth while oil-and-gas, electronics manufacturing services, and technology registered the steepest profit declines, the research house noted.

“The good news is that 20% of companies declared higher dividends,” CIMB Securities noted.

Banks, which have the largest weighting in the KLCI, mostly performed as expected but are set to see a softer quarter ahead as a policy rate cut weighs on interest income, the research house flagged.

“Going forward, we remain sanguine on the local equity market underpinned by positive macro performance as well as inexpensive valuation,” said MBSB Research.

Further, foreign funds are expected to return to the regional emerging markets as the US Federal Reserve resumes cutting rates, likely in September 2025, the research house said and maintained its year-end KLCI target at 1,650 points.