RHB Research has maintained its end-2026 FBM KLCI target at 1,750 points after Malaysia’s June-quarter reporting season delivered a sharp improvement from the preceding quarter, although geopolitical and global macroeconomic risks are expected to keep the market rangebound.
The research house described the June 2026 quarter as a “solid” reporting season, with corporate results coming in slightly ahead of expectations and earnings revisions turning marginally positive.
Notably, it was the first quarter since December 2020 in which no sector recorded overall earnings that RHB deemed below expectations.
Six sectors — automotive, oil and gas (O&G), transportation, gaming, healthcare and rubber products — delivered results above expectations.
Across RHB’s stock coverage, 21.2% of companies beat forecasts while 21.9% missed. This compared with 13.6% beating and 31.8% missing expectations in the March quarter.
As a result, the misses-to-beats ratio improved sharply to 1.0 from 2.6 previously.
RHB said normalised net earnings forecasts for its stock basket were revised upwards by 0.8% for 2026 and 0.2% for 2027.
The positive revisions were driven primarily by automotive, plantation, O&G, transportation, construction, healthcare, rubber products and telecommunications companies, offset by downward revisions for banks, energy, consumer and non-bank financial stocks.
RHB attributed the resilience in Malaysian corporate earnings to several factors, including the country’s position as a net O&G exporter, robust commodity prices and the ongoing technology-sector upcycle.
Large-cap FBM KLCI constituents also recorded positive earnings revisions, with forecasts raised by 0.9% for 2026 and 0.6% for 2027.
Upgrades among benchmark stocks came primarily from the plantation, O&G, healthcare, telecommunications and property sectors, while banks, construction, energy and consumer stocks experienced negative earnings adjustments.
The improving earnings picture, however, was accompanied by emerging pressure within the banking industry.
RHB has downgraded the banking sector to NEUTRAL from OVERWEIGHT, citing valuations as well as early signs of funding-cost and asset-quality headwinds.
Headline guidance from major banks was largely unchanged during the reporting season, although some lenders adjusted their net interest margin and credit-cost expectations.
Funding costs emerged as a common concern as banks sought to meet strong loan demand against a backdrop of rising bond yields. RHB also observed that asset-quality pressures have started to increase in the household segment.
Despite the improvement in corporate results, RHB said the earnings upgrades were not sufficiently large to warrant a change to its FBM KLCI target.
It expects geopolitical uncertainties and challenging global macroeconomic conditions to limit the Malaysian equity market’s absolute upside.
Corporate earnings, however, are likely to remain an important determinant of the market’s fundamental direction.
“The market will likely remain rangebound with downside support from robust liquidity conditions,” RHB said.
Against this backdrop, the research house continues to favour a trading-oriented strategy, expecting investors to rotate into stocks and sectors that have lagged the broader market.
RHB said portfolio positioning should nevertheless remain anchored by a defensive core, particularly as changing inflation conditions push the global interest-rate environment towards a more hawkish stance.
The research house remains OVERWEIGHT on plantation, energy, O&G, property, construction, basic materials, technology, healthcare and transportation.
RHB expects rotational interest in laggard stocks and sectors to continue as investors balance improving domestic corporate fundamentals against persistent geopolitical, inflation and global interest-rate risks.
