This article first appeared in Capital, The Edge Malaysia Weekly on December 29, 2025 - January 4, 2026

Founder and chief investment officer, Singular Asset Management

Malaysia enters 2026 with a combination of strengthening fundamentals, improving corporate visibility and low foreign ownership. For investors, this combination is often not a warning sign, but serves as an early marker of opportunity. Despite the frustration many felt in 2025, the ingredients for a more constructive year ahead are quietly falling into place.

By most metrics, 2025 should have been a more supportive year for Malaysian equities. The ringgit strengthened 8.2% against the US dollar, macro indicators stabilised, and approved investments rose 18.7% year on year to RM190.3 billion in the first half of the year.

Additionally, tourism rebounded sharply, pushing Malaysia into a services trade surplus for the first time in 14 years. On the surface, the economic backdrop improved across several fronts.

Yet the equity market told a different story. For much of the year, the FBM 100 remained flat to slightly negative. Foreign investors withdrew RM19.1 billion in the first 10 months of the year, pulling foreign shareholding below 14% from around 20% in late 2024. What we witnessed was a clear disconnect: fundamentals strengthened, but sentiment and positioning did not follow.

This disconnect between fundamentals and market performance is not unusual for Malaysia.

In 2025 alone, despite a flat market, 30 constituents of the FBM 100 recorded returns in excess of 10%, while the top 10 delivered gains of more than 30%. Over the past decade, similarly, despite negative returns at the index level, more than 90 Malaysian companies rose over 100% during the same period. These figures reinforce a structural reality: Malaysia has always been a stock-picker’s market rather than an index-driven one.

As the market looks ahead to 2026, three forces stand out — each with the potential to unlock a rerating if foreign positioning normalises.

1. Global monetary easing could bring foreign capital back to Asean

With major economies entering an easing cycle and the US expected to continue cutting rates, the environment becomes more favourable for capital to rotate out of the US and back into Asia. Malaysia, with its deeply under-owned status, stands as a potential beneficiary. In the last 50 years, US dollar weakness has repeatedly coincided with stronger equity performance across Asian markets. Given today’s low foreign base, even a modest normalisation in participation could have an outsized impact on valuations.

2. The investment cycle is turning up

Malaysia’s investment cycle is gaining momentum. Of the RM190.3 billion in approved investments recorded in the first half of 2025, foreign investors accounted for more than half, led by Singapore and China. These investments are increasingly directed towards higher-value segments such as advanced manufacturing, digital infrastructure and data-related industries.

Unlike short-term portfolio flows, these commitments tend to span multiple years, providing earnings visibility and creating broader spillover effects across the economy. The timing is reinforced by Visit Malaysia Year 2026, which builds on an already strong tourism recovery and provides additional support to services and consumer-facing sectors.

3. Corporate visibility has improved

Earlier in 2025, tariff-related uncertainty and geopolitical noise weighed on business confidence and delayed capital expenditure decisions. As these risks receded, companies were better able to plan, commit to expansion and execute longer-term strategies.

Malaysia’s value-up opportunity

Beyond cyclical drivers, Malaysia should also consider pursuing its own value-up agenda. Across Asia, governance and capital-efficiency reforms have driven powerful reratings.

Japan’s Tokyo Stock Exchange reforms — particularly those targeting companies trading below one times book value — prompted firms to lift return on equity (ROE), unwind cross-shareholdings and accelerate share buybacks. Similar initiatives in South Korea and Singapore have delivered comparable results. Malaysia shares many of the same characteristics that made these reforms effective elsewhere: a large cohort of companies trading below book value, wide valuation dispersion, and considerable scope to improve returns through better capital allocation.

Even so, investors should not expect broad index performance to tell the full story in 2026. Malaysia’s equity market has repeatedly shown that opportunities emerge at the company level, not through passive exposure.

Despite a flat broader market over the past 10 years, our portfolio generated meaningful returns by focusing on companies with strong competitive advantages, led by trustworthy management teams that invest wisely for growth, operate ethically, and actively address environmental and social responsibilities.

Peter Lynch, the legendary manager of Fidelity’s Magellan Fund, observed that:

“In the short term, there is no correlation between business performance and stock performance. In the long term, the correlation is 100%.”

As 2026 approaches, we believe Malaysia offers compelling opportunity — not through the index, but through the right companies with solid fundamentals, many of which are hiding in plain sight across Bursa Malaysia today.

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