KUALA LUMPUR (Jan 21): Malaysia’s equity market is set for a long-term re-rating on the back of improving earnings visibility, according to Manulife Investments Management (Manulife IM).

Strong consumption coupled with firm tourism is expected to translate into better corporate earnings, according to Manulife IM head of Asian equities June Chua. Coupled with higher dividend yield offerings versus regional peers, Malaysia is quite attractive in the current rate-cut cycle environment, she added.

“We don’t think Malaysia is just tactical; we do think it's ripe for a long-term re-rating,” Chua said during an outlook briefing on Wednesday (Jan 21).

She also noted record-low foreign shareholding offers recovery potential, while improved government policies are attracting foreign interest.

Chua said a continued weak US dollar would be positive for Asian markets.

According to Chua, the MSCI AC Asia ex-Japan Index, which tracks large- and mid-cap stocks across developed and emerging markets, posted gains in nine out of 10 years of dollar weakness since 2000.

“The global backdrop of lower US rates resulting in a weaker US dollar sets up our case for a very positive outlook for Asia,” she noted.

“Dispersion across markets and sectors remains high, and active stock selection remains critical as we focus on companies with strong balance sheets, sustainable earnings growth, and exposure to long-term structural themes,” she added.

In Asean, markets continue to benefit from supply-chain diversification, infrastructure investment, and improving domestic demand, albeit with selective opportunities across markets, she noted.

Analysts are positive on the FBM KLCI for 2026.

A combination of underperformance last year, an expected return of foreign inflows, earnings growth, and valuation being below historical levels suggests room for the benchmark index to climb in 2026.

The FBM KLCI could climb to 1,832.69 points, according to the aggregated target prices of the 30 companies in the FBM KLCI for the next 12 months compiled by Bloomberg. The index currently stands at 1,702.16 points.