Kuala lumpur: Rakuten Trade Sdn Bhd is maintaining its end-2026 Bursa Malaysia benchmark index FBM KLCI target at 1,770, supported by clearer earnings visibility from Malaysia's power and grid infrastructure spending.

According to BERNAMA News Agency, the digital equity broker stated that this target presumes the upcoming Budget 2027, set to be tabled on October 9, will confirm rather than significantly delay the planned energy-transition and grid-related spending initiatives. Despite approximately RM2 billion in net foreign selling during August, domestic investors have continued to bolster the market. Recent earnings reports indicate continued growth, with utilities playing a significant role.

Kenny Yee, head of research at Rakuten Trade, commented, "We are keeping our 1,770 target. The recent results season depicts that growth remains intact, with utilities being one of the contributors, and they sit in the grid, not in the chip cycle." The firm views Malaysia's ongoing investment in power infrastructure as a crucial earnings driver through the end of the year and beyond.

The opportunity extends beyond traditional renewable energy, with grid expansion necessitating sustained investment in transmission, substations, electrical systems, and related engineering works. Moreover, the government has identified energy transition as one of five priority sectors for Budget 2027, alongside semiconductors, the digital economy, artificial intelligence, and Islamic finance.

"Tenaga Nasional Bhd's grid capital expenditure programme has risen to RM43 billion for 2025-2027, compared with RM21 billion spent between 2022 and 2024. Further investment is expected through 2030 as the national grid is upgraded to support renewable energy, battery storage, and rising electricity demand, including those from data centres," the broker elaborated.

Rakuten Trade acknowledges Budget 2027 as the next critical test for its target. Yee mentioned that the firm will reassess its KLCI target if Budget 2027 postpones energy-transition spending to a later stage or if the grid allocation falls significantly short of expectations.

Looking ahead, potential risks include weaker-than-anticipated budget allocations, delays in major infrastructure tenders and project execution, continued foreign fund outflows, and volatility in global interest rates.