KUALA LUMPUR (Jan 16): Foreign funds are expected to return to Malaysia’s equity market this year as the US’ tariff policy begins to weigh on the world’s largest economy, according to Rakuten Trade.
The policy appears to have “backfired” judging from the US’ cooling job market and the “stop-start” economic growth, said the brokerage’s head of research Kenny Yee Shen Pin at a briefing on Friday. US rate cuts to counter the slowdown may spur funds into Malaysia and other economies, he said.
“We believe Southeast Asian markets may be in the spotlight” as fund flow spills over to the region from China and Hong Kong, Yee said, noting Malaysia is more politically and financially stable than its regional peers.
A cut in US interest rates, together with stronger domestic corporate earnings, grounds the consensus view of foreign inflows into the local equity market in 2026. Last year, foreign investors were net sellers, dumping RM22.6 billion worth of Malaysian stocks.
The FBM KLCI added just 2% in 2025, lagging behind many Asian market indices that broke record highs and continued to make gains this year.
Foreign shareholding hovers at 19% and has ample room to rise to 25% to 30%, last seen over a decade ago, said Rakuten’s Yee. The brokerage expects the KLCI to end 2026 at 1,810.
Banking, construction, consumer
In terms of strategy, Rakuten is overweight on the banking, construction, consumer, and power sectors.
The banking sector remains the favourite given strong dividend yields and earnings growth, according to Rakuten equity research vice-president Thong Pak Leng. Top picks are AMMB Holdings Bhd (KL:AMBANK), CIMB Group Holdings Bhd (KL:CIMB) and RHB Bank Bhd (KL:RHBBANK).
Sustained activity in data centres, logistics, high-tech manufacturing and ongoing infrastructure projects are driving the construction sector, Thong noted. Rakuten’s top picks are Gamuda Bhd (KL:GAMUDA), Sunway Construction Group Bhd (KL:SUNCON), Kerjaya Prospek Group Bhd (KL:KERJAYA) and Inta Bina Group Bhd (KL:INTA).
The consumer sector is expected to benefit from lower production costs, a stronger ringgit, and a spending boost from tourism. Rakuten favours Mr DIY Group (M) Bhd (KL:MRDIY), Fraser & Neave Holdings Bhd (KL:F&N) and Spritzer Bhd (KL:SPRITZER) for exposure to the sector.
Higher electricity demand from data centres and policy push are energising power, utilities and renewable energy stocks, Thong said, picking Tenaga Nasional Bhd (KL:TENAGA), YTL Power International Bhd (KL:YTLPOWR), Malakoff Corp Bhd (KL:MALAKOF), Samaiden Group Bhd (KL:SAMAIDEN) and Solarvest Holdings Bhd (KL:SLVEST).