KUALA LUMPUR (March 13): Foreign investors could come back in droves to Malaysian stocks as the ringgit appreciates amid protracted tensions in the Middle East, Rakuten Trade said.
Despite the earlier outflows, foreign shareholding on Bursa Malaysia has remained relatively steady, suggesting that longer-term investors have largely maintained their positions while short-term traders exited the market, head of research Kenny Yee Shen Pin said at a briefing on Friday.
“Foreign participation on the local bourse has been rather lacklustre of late,” Yee said. “Hopefully the situation will improve as we move further into the year.”
The FBM KLCI is recovering from a sharp decline as the US-Israel war against Iran enters the 14th day. Iran has vowed to keep the Strait of Hormuz closed, disrupting shipments of everything from oil to fertilisers crucial for the global economy.
Data presented by Rakuten showed foreign funds recorded net inflows of about RM1.28 billion year to date. The ringgit, meanwhile, is up nearly 3% against the US dollar so far this year thanks to Malaysia’s petroleum exports even as oil prices hovered near US$100 (RM393.40) per barrel.
"At current levels, I think Malaysia is well positioned to withstand the crude oil price,” Yee said.
A stronger ringgit against the US dollar could serve as a catalyst for renewed foreign interest in Malaysian equities, he said. “I believe the strength of the ringgit versus the US dollar will be the main catalyst to attract foreign funds back into the market,” he added.
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Rakuten’s forecast is for the KLCI to end 2026 at 1,800 versus about 1,699 now. The research house is projecting a rebound in corporate earnings growth to 7.9% in 2026 and 6.5% in 2027, after a marginal contraction of 0.2% in 2025.
On strategy, Rakuten is 'overweight' on banking, construction, consumer, oil and gas, plantation, utilities and technology.
The brokerage continues to favour banking stocks for their resilient earnings and attractive dividend yields, with AMMB Holdings Bhd (KL:AMBANK), CIMB Group Holdings Bhd (KL:CIMB), Malayan Banking Bhd (KL:MAYBANK) and RHB Bank Bhd (KL:RHBBANK) among its preferred names.
Improving project visibility, including upcoming infrastructure developments, such as the Penang light rail transit and Subang Airport redevelopment, will boost Gamuda Bhd (KL:GAMUDA), Sunway Construction Group Bhd (KL:SUNCON) and Kerjaya Prospek Group Bhd (KL:KERJAYA).