KUALA LUMPUR (June 4): The recently concluded first-quarter earnings season showed weaker momentum, with earnings misses outpacing positive surprises across key sectors, prompting analysts to call for a defensive stance amid geopolitical risks.

In a strategy note published on Thursday, CIMB Securities said during the quarter that 97 companies under its coverage had released their results: only 12% beat expectations, 24% missed, and the remainder 64% met forecasts.

This translates into a beat-to-miss ratio of 0.52, falling from 1.33 in 4Q2025 but improved 0.24 in 1Q2025. Despite this, aggregate net profit still grew 3.7% year-on-year, aided by festive spending, lower financing costs, and selective front-loading of orders, though quarter-on-quarter earnings slipped 1.7%.

CIMB Securities noted that sector performance in 1Q2026 was uneven, with building materials, oil & gas, and autos showing stronger momentum, while consumer, property, construction, and gaming were the main laggards.

The firm highlighted that earnings resilience was supported by cost optimisation and better spreads in cyclical sectors, but weaker sales, margins, and progress billings weighed on consumer and property-related counters.

Following the review, CIMB upgraded plantation, building materials, oil & gas, and technology to “overweight”, while downgrading utilities, property, and construction to “neutral”.

Meanwhile, Hong Leong Investment Bank  reported that 61% of companies under the firm’s coverage met the forecast, 29% missed and 10% beat expectations. Aggregate core earnings fell 6% quarter-on-quarter but rose 1% year-on-year, with banks dragging overall performance.
 
The firm retained its KLCI target at 1,790, expecting markets to stay soft through the second quarter of 2026 before recovering towards year-end once geopolitical tensions ease.

In a separate research note, RHB Research echoed the downbeat tone, noting that just 12.1% of companies outperformed, the weakest ratio since 2018, with banks, plantations and property among the key laggards.

“We still advocate a core defensive investment stance, coupled with a trading mentality anchored on a buy-on-weakness strategy,” RHB said.

To navigate increased market volatility sparked by the upcoming Johor state elections, the research house advises investors to adopt a defensive posture.

Due to heightened political risk and a downward revision in future corporate earnings, the firm anticipates that the FBM KLCI will trend lower within a tight trading range.  

Consequently, RHB has officially cut its end-2026 FBM KLCI market target to 1,750 points from 1,780 points, utilising an unchanged 15.5 times valuation multiple.

However, if political uncertainties or global pressures trigger an aggressive sell-off, historical precedents indicate the index has a worst-case technical safety floor down at 1,433 points, it added.

Despite the soft start, all three houses expect earnings growth to remain positive in 2026, underpinned by resilient GDP and selective sector strength, but cautioned that investors should adopt defensive positioning until geopolitical and domestic risks subside.