Kuala lumpur: Maybank Investment Bank Bhd (Maybank IB) projects the FBM KLCI to reach 1,730 by end-2026 under its base-case scenario, while its bull-case scenario envisions the benchmark index rising to 1,850.
According to BERNAMA News Agency, Maybank IB head of research Lim Sue Lin indicated that the upward trajectory would be primarily driven by banking stocks, given their status as the largest components of the FTSE Bursa Malaysia KLCI (FBM KLCI), alongside heavyweight counters such as Gamuda and Tenaga Nasional.
Lim explained that these key heavyweights align well with the themes for 2026, driven mainly by macroeconomic factors and domestically driven sectors. During a virtual media briefing on Malaysia's macro and market outlook for 2026, she noted that Maybank IB has also considered a bear-case scenario to account for downside risks, including potential black swan events and geopolitical developments, which could see the FBM KLCI falling to around 1,550.
On earnings, Lim stated that the house is forecasting overall earnings growth of about eight per cent in 2026, with the bulk of growth still coming from the banking sector. While bank earnings growth is expected to be more modest at around five per cent, the sector accounts for roughly half of FBM KLCI earnings, making its performance a significant determinant of the index's overall trajectory.
Lim added that sectors such as construction and healthcare are expected to continue delivering strong earnings growth, although some headwinds remain for utilities and telecommunications. In the utilities space, she noted that Tenaga Nasional resolved its tax issues in November last year, but the higher expected effective tax rate could weigh on earnings in 2026. Further clarity is anticipated at the full-year results analyst briefing towards the end of February.
On expectations of a pre-election play this year, Lim said it is still too early to frame 2026 squarely as a pre-election theme for the equity market, highlighting the current parliamentary term runs until end-2027 and the timing of any early election remains uncertain. She suggested that a more meaningful signal for investors would be the announcement of Budget 2027 later this year, which would offer clearer indications of whether policy settings are shifting towards an election-driven stance.
In a typical pre-election environment, investors tend to focus on sectors such as consumer, infrastructure, and banks, which historically benefit from increased fiscal spending and policy support in the run-up to polls.
On the ringgit, Maybank Singapore head of FX research Saktiandi Supaat said the local currency has outperformed its regional peers, including during the November 2025 market resurgence, reflecting its relative resilience. He mentioned that Maybank had forecast the ringgit to trade within a range of 4.05 to 4.10 against the US dollar by end-2026.
Saktiandi highlighted that strong bond inflows in early 2025 had been a key support for the ringgit. Fast-money flows have also been supporting the currency in 2026 and could continue to do so in the near term, although uncertainties remain, particularly around potential US-specific tariffs. Another factor supporting the ringgit is the expectation that Bank Negara Malaysia will keep interest rates on hold in 2026 at 2.75 per cent, preserving the currency's carry.
He noted that the ringgit is expected to hover around the 4.00 to 4.05 range in the first quarter, with the US dollar-ringgit pair likely to drift towards the 4.00 level. There is some risk of overshooting if US dollar weakness persists in the first half of the year, with the currency potentially averaging around the 4.00 level by mid-year before gradually edging higher towards about 4.05 by year-end.