The local equity market is entering the second half of 2026 facing a challenging macroeconomic environment, with external risks including Middle East tensions, supply chain disruptions, inflationary pressures and potential US interest rate tightening likely to influence investor sentiment, according to MBSB Research.
In a thematic report ahead of the 2026 FIFA World Cup, MBSB Research said historical data showed that World Cup years have had limited influence on the FBM KLCI, with broader macroeconomic developments playing a much larger role in determining market performance.
Analysing 12 World Cup years dating back to 1978, MBSB found that the FBM KLCI recorded positive full-year performance in only four instances, although the average performance remained slightly positive at 0.4%.
The research house noted that major market movements during World Cup years were instead driven by factors such as economic cycles, commodity prices, financial crises, policy changes and global risk appetite.
“World Cup tournaments did not drive markets; macro shocks, commodity cycles, crises, policy changes and global risk appetite mattered more,” MBSB Research said.
However, market performance during the actual tournament period appeared more favourable, with the FBM KLCI recording positive returns in seven out of 12 World Cup periods, with a median gain of 0.7%.
MBSB cautioned that the stronger performance during tournament periods should not be interpreted as a direct World Cup effect, as broader market themes remained the key driver.
For 2H26, MBSB Research believes investors should adopt a more balanced positioning strategy, likening portfolio construction to football tactics.
The research house recommended starting with a defensive 4-4-2 equity formation, consisting of four defensive anchors, four stabilising midfielders and two selective growth-focused stocks.
“This is not the time to start with a high defensive line. The better approach is to keep shape, absorb volatility and counterattack selectively through stocks with visible growth drivers,” it said.
The suggested “starting XI” comprises:
- Tenaga Nasional Bhd – BUY, target price (TP): RM16.40
- YTL Power International Bhd – BUY, TP: RM5.65
- 99 Speed Mart Retail Holdings Bhd – BUY, TP: RM4.37
- CelcomDigi Bhd – BUY, TP: RM3.54
- CIMB Group Holdings Bhd – BUY, TP: RM9.29
- Hong Leong Bank Bhd – BUY, TP: RM30.50
- MR DIY Group (M) Bhd – BUY, TP: RM2.13
- MISC Bhd – BUY, TP: RM9.22
- Gamuda Bhd – BUY, TP: RM5.60
- Inari Amertron Bhd – BUY, TP: RM2.95
MBSB Research said the defensive allocation is designed to provide portfolio stability while maintaining exposure to selected growth opportunities.
The strategy could shift towards a more aggressive 3-5-2 formation if macro conditions improve, including easing US rate concerns, stabilising geopolitical risks, lower inflation pressure and improving market breadth.
Under a more favourable environment, investors could increase exposure to cyclical and recovery-driven sectors while maintaining defensive holdings.
MBSB highlighted that a more defensive 5-3-2 formation would be suitable during a sharper economic slowdown or prolonged higher-for-longer interest rate environment, while aggressive formations such as 4-3-3 or 3-4-3 would only be suitable once risk appetite returns strongly.
The research house added that investors should remain disciplined amid uncertain conditions, focusing on companies with earnings visibility, defensive characteristics and clear growth catalysts.
“In short, we start 2H26 in 4-4-2 because the match still requires discipline, but we keep the bench ready,” MBSB Research said.
