KUALA LUMPUR (Dec 17): The Malaysian equity market, which has missed the wider global record rally in 2025, is well-positioned for a better 2026 on low foreign positioning and relatively cheap valuation, said TA Securities.

This is on top of greater clarity on US trade policy and ample liquidity from ongoing monetary easing, although geopolitical tensions remain a top concern, the research house said in its latest strategy note.

"Low foreign positioning creates upside optionality for substantial inflows should global risk appetite recover," it said, pointing to foreign shareholding of 19% in November 2025, not far from the 2003 trough of 18.1%.

The local stock market recorded an outflow of over RM20 billion this year, its highest since 2020 (RM24.6 billion).

Since the start of 2020, foreign investors have sold RM50.2 billion in Malaysian stocks, TA Securities said.

The exodus in 2025 resulted in Malaysia's benchmark KLCI trading flat this year while equity markets globally, from the US to Europe and Asia, touched new record highs as monetary easing boosted trading sentiment.

Small-cap stocks are in the red with the ACE Index down 11.7% while the EMAS Index, which tracks the Main Market stocks, is down over 4% in the same period.

"As economies rebound, growth stocks with scalable models and strong earnings potential offer investors a powerful avenue to boost portfolio performance," it said on small- and mid-cap growth stocks for the year.

TA Securities projects the KLCI to trade at a forward 2026 price-to-earnings ratio of 14.3 times, with a year-end 2026 target of 1,760 points.

The ringgit is seen averaging at 4.10 against the US dollar in 2026, although external volatility or domestic uncertainties could weigh on the local currency, it added.