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KUALA LUMPUR (Feb 5): Local equities are expected to trend higher in 2026, supported by the stronger ringgit as well as the return of foreign funds, says MBSB Research.
In a note on Thursday, the research house said the firmer ringgit has helped attract foreign investors back into the local equity market, with the ringgit ending January at RM3.94 against the US dollar.
With foreign fund inflows totalling RM1 billion at the end of last month, MBSB Research said it is likely to contribute to better local equity prices.
Against this backdrop, the research house expects valuation multiples to move closer to long-term averages and has revised its 2026 equity market targets higher. It also raised its FBM KLCI 2026 target to 1,850 points from 1,750 points.
MBSB Research lifted its FBM Emas Shariah target to 13,200 points and its FBM 70 target to 19,100 points.
“The prospects of declining US dollar interest rates may encourage some investors to redirect their funds to countries/regions with more stable interest rates,” it added.
Concerns over the US economy have also eased after the US Federal Reserve struck a more optimistic tone in its January policy statement, said MBSB Research. The Federal Open Market Committee said economic activity is expanding at a solid pace and noted signs of stabilisation in the labour market, reducing worries of a near-term slowdown.
The research house maintained its view that Malaysia’s economy will grow 4.3% in 2026, while market consensus expects FBM KLCI earnings to rise 7.7% year-on-year.
However, risks remain, including the possibility of a US economic slowdown amid lingering labour market weakness and ongoing geopolitical uncertainties in Eastern Europe, the Middle East and East Asia.
“While not foreseen, major escalations that significantly heighten the kinetic intensity and broaden the geographical theatre of war could substantially magnify the potential economic fallout onto the wider world,” said MBSB Research.