Win some, lose some

THE financial results season for corporates in Malaysia concluded recently. And the verdict?

It was a mixed bag with experts having equally mixed views on what sectors to bank on.

Among some of the favoured sectors by analysts and fund managers for 2026 are technology, semiconductor, construction and healthcare. Even within these, only selected names are top picks.

Fortress Capital Group founder and chief executive officer (CEO) Datuk Thomas Yong says he is interested in three subsegments.

“First, the automated test equipment segment – as artificial intelligence (AI) chiplets grow more complex, the cost of test failure compounds, and the demand for sophisticated, high-throughput automated test equipment grows structurally.

“Second, wide-bandgap power semiconductors – silicon carbide and gallium nitride players.

As AI compute clusters scale toward 200,000 to one million graphics processing units, the 54 volts legacy power architecture hits a physical wall and the shift toward 800 volts high-voltage direct current architecture makes wide-bandgap semiconductors essential infrastructure for reducing conversion losses in next-generation AI data centres,” Yong tells StarBiz 7.

Malaysia’s role in this supply chain is growing – whether in assembly, testing or supply chain services – carrying a structural tailwind.

“We are not buying legacy consumer electronics, outsourced semiconductor assembly and test (Osat) companies with high exposure to smartphones and personal computers,” he adds.

Chief research officer at Trident Analytics Sdn Bhd Lim Tze Cheng disagrees. He favours Osat companies.

“Headwind of currency aside, we are seeing the momentum of global tech spending flowing down to our domestic value chain.

“Be it Osat, equipment makers, precision component players and even metal fabricators, we are seeing a very strong demand pipeline. My take is that we are looking at a three-year boom cycle,” Lim says.

Yong also likes the construction sector, saying that within this space, his preferred names are those where the backlog is weighted toward data centre construction – which carries higher margins and faster execution cycles than traditional public infrastructure.

“We are also interested in names where international diversification of the order book provides a natural hedge against domestic capital expenditure cycle timing risk and avoids contractors with oversized reliance on a single government mega-project that may face timeline slippage or funding reallocation,” he adds.

“Our view on tourism is more cautious than the market consensus. Visit Malaysia 2026 (VM2026) is a real catalyst, but higher arrivals alone do not translate automatically into durable earnings growth.

“We are most interested in names with high incremental margins on additional visitors – businesses where the next customer is incrementally very cheap to serve because fixed costs are substantially sunk.

“Airlines, selected mall operators with high-footfall locations and strong tenant mix fit this description.”

Adjacent to tourism is the healthcare sector.

“We have been more cautious about this, especially with regulatory overhang such as medical inflation running at elevated levels, potential diagnosis-related group reimbursement framework changes, and Bank Negara Malaysia’s cap on medical insurance premium increases, which risks slowing insurer approval rates and compressing inpatient volumes.

“That said, we favour operators with strong regional patient referral networks, demonstrable yield improvement per patient, and cost structures that are defensible even in a tighter insurance reimbursement environment.”

He notes that hospital groups with genuine medical tourism draw – positioning Malaysia as a value-for-quality destination relative to Singapore and Thailand – carry a pricing power premium that domestically-oriented peers do not.

Areca Capital CEO Danny Wong also likes the healthcare sector, saying this is underpinned by resilient, inelastic demand from an ageing population, rising disease prevalence and improving health awareness.

“Growth should be supported by capacity expansion and a medical tourism uplift, alongside favourable demographic tailwinds. In contrast, glove manufacturers are likely to remain under pricing pressure from Chinese competitors in non-US markets, compounded by a stronger ringgit.”

Wong also warns that the real estate investment trust (REIT) industry has a major overhang issue with regards to the clarity of the withholding taxes which expired at the end of 2025.

“Nevertheless, Malaysian REITs particularly in hospitality and retail do remain resilient due to the VM2026. If the withholding tax concession is not renewed, the total effective tax rate could rise to 12% for investors with larger REIT portfolios from 2% for investments above RM100,000,” he adds.

Financial report card

In terms of financial performance for 2025, Lim says the sectors that delivered good numbers were banking, plantations and gloves while sectors that delivered numbers that were below market expectations were the technology-related and consumer sectors.

“The banks’ numbers were not surprising, considering that loan growth is chugging along with economic growth. The investments into data centres, energy transition projects and industrial factories have been supporting loan demand,” he adds.

A client note from AHAM Asset Management says the reporting season shows that approximately 48% of companies delivered earnings in line with expectations and 28% exceeded forecasts, while 24% fell short.

“This marks an improvement from the previous quarter, when around 29% of results disappointed. Overall, corporate performance remains reasonably resilient.​”

It notes from a sector perspective, healthcare and cement emerged as key outperformers and in contrast, earnings disappointments were more evident in gaming, telecommunications, petrochemicals and parts of the electronics manufacturing services segment.​

Among the larger index constituents, banks were largely in line with expectations with AMMB Holdings Bhd and Alliance Bank Malaysia Bhd coming in above on the back of lower credit costs, while Malayan Banking Bhd and Public Bank Bhd are experiencing some share price weakness, primarily due to a less exciting capital management outlook.

Yong says: “On the surface, the FBM KLCI 30-stock aggregate earnings declined double-digit year-on-year. However, this was almost entirely attributable to one idiosyncratic event: PPB Group Bhd’s RM3.19bil net loss (after recognising a RM4.17bil impairment on its Wilmar International stake, triggered by regulatory penalties and legal proceedings in Indonesia and China).

“Stripping out that distortion, the broader picture across the top 100 companies by market capitalisation is markedly more constructive – combined fourth-quarter earnings rose a solid low double digit year-on-year (y-o-y), with 67 companies delivering y-o-y profit growth and 56 posting sequential expansion.

“However, this also underscores the rather ‘K-shaped’ performance we are seeing within any particular sector,” Yong adds.

Lim raises another point related to corporate earnings.

“Is a stronger ringgit a boon or bane? This is not about Malaysian companies needing a weaker ringgit to be globally competitive. For the technology-related companies, as with other export-oriented sectors, the biggest hit is definitely coming from the strengthening of the ringgit,” he says.

“As for consumers, the general ground sentiment is weak. Yes, there is a divergence between the strong gross domestic product (GDP) numbers and the ground economy. While the GDP is generally driven by investments, the higher ‘costs’ coming from taxes are drying up consumer wallets.”