Choppy gains amid rising risks

EXPECT Malaysian equities to keep swinging in the near term as geopolitics, oil prices and earnings season collide.

But the bigger picture still tilts towards selective opportunity hunting rather than outright caution.

Investors are likely to see rotations intensify across sectors, with domestic liquidity and index resilience doing most of the heavy lifting, even as external noise refuses to fade.

UOB Kay Hian (UOBKH) Research sets the tone for a choppy but tradable backdrop this month.

“We still expect a volatile trading environment amid unresolved Middle East tensions,” the brokerage says.

“Near-term market direction is likely to be increasingly results-driven, with tactical rotations dominating flows,” it adds.

Against this backdrop, it sticks to its barbell strategy, which is balancing defensiveness with selective risk-on exposure.

“We anchor portfolios in large-cap names offering resilient domestic earnings visibility and liquidity support to navigate external volatility, while selectively accumulating laggard stocks with still-undemanding valuations, underpinned by company-specific catalysts that could drive a rebound as risk appetite improves,” it explains.

It also flags energy exposure, noting: “In parallel, we position into beneficiaries of elevated Brent crude prices and sector leaders with structural tailwinds, allowing for opportunistic upside participation while maintaining portfolio resilience.”

UOBKH Research’s top picks for this month span banks, plantations, construction, energy and consumer-linked plays.

Key names include CIMB Group Holdings Bhd (target price or TP: RM9.30), Gamuda Bhd (TP: RM5.25), Hap Seng Plantations Holdings Bhd (TP: RM2.45), MISC Bhd (TP: RM9.50), Northeast Group Bhd (TP: 93 sen), Oriental Kopi Holdings Bhd (TP: RM1.40), Oxford Innotech Bhd (TP: 40 sen), Pekat Group Bhd (TP: RM2.00), Tenaga Nasional Bhd (TNB) (TP: RM16.30) and Yinson Holdings Bhd (TP: RM2.75).

The mix appears to lean on large-cap stability while still sprinkling in smaller-cap recovery candidates.

Structural bull

TA Research takes a longer-cycle view, arguing Malaysia is already in a structural bull phase.

It states: “We continue to view the March 2020 low of 1,207 as the conclusion of the prior bear-market cycle and the beginning of a new structural bull phase for the FBM KLCI.”

“We project the uptrend to extend into 2026, with scenario targets of 1,695 (worst case), 1,733 (base case), and 1,826 (best case),” it adds.

Strategy-wise, TA Research highlights: “Our strategy remains to accumulate during market corrections and gradually realise profits as the index approaches 1,695, 1,733, and 1,826 under the respective scenarios.”

Its blue-chip basket reinforces financials, utilities and construction.

TA Research’s top picks include Malayan Banking Bhd (TP: RM13.30), Public Bank Bhd (TP: RM5.56), TNB (TP: RM18.00), CIMB (TP: RM9.27), IHH Healthcare Bhd (TP: RM10.30), Hong Leong Bank Bhd (HLB) (TP: RM25.96), RHB Bank Bhd (TP: RM9.27), Telekom Malaysia Bhd (TM) (TP: RM8.80), Gamuda (TP: RM5.62) and AMMB Holdings Bhd (TP: RM7.40).

Still constructive

RHB Research stays broadly constructive but stresses geopolitics is shaping a more tactical playbook.

“We are still constructive on domestic equities,” it notes, while warning that “raging geopolitical events are muddying the waters, complicating near-term macroeconomic expectations and testing investor sentiment.”

Despite that, it argues there are still strong structural supports, including robust domestic liquidity conditions, as well as ample cash on the side lines and Malaysia’s position as a net oil and gas exporter.

RHB Research’s base case FBM KLCI target is 1,780 points, with valuation downside cushioned around negative two standard deviation from the mean or 1,433 points.

On strategy, RHB Research stresses positioning discipline, stating, “The defensive investment stance promulgated in our 2026 equity outlook report centred on investor circumspection, trading mentality, and a buy-on-weakness strategy remains applicable.”

On portfolio construction, it pushes a blend of value, growth and yield, saying: “We advocate a balanced strategy across value, growth, and yield themes – with a focus on companies offering high earnings quality, resilience to supply-side disruptions, strong cash-flow visibility, and sustainable dividends.”

It further adds that “we see scope for bottoming-out laggards to re-rate, supported by a gradual cyclical recovery and ongoing sector rotation.”

RHB Research’s top buy list is broad-based and defensive-tilted but still growth-aware.

This includes Public Bank (TP: RM5.45), TNB (TP: RM16.50), HLB (TP: RM25.70), TM (TP: RM9.30), Nestle (M) Bhd (TP: RM130), MR D.I.Y. Group (M) Bhd (TP: RM2.20), KPJ Healthcare Bhd (TP: RM3.79), Eco-Shop Marketing Bhd (TP: RM1.80), Kerjaya Prospek Group Bhd (TP: RM3.11), Binastra Corp Bhd (TP: RM2.72), CTOS Digital Bhd (TP: RM1.11) and AME-REIT (TP: RM1.95).

In a more extreme scenario, RHB Research warns that an extended conflict or snowball into a wider regional conflagration, resulting in the weaponisation of oil, will have global inflationary implications.

It adds that such conditions could lead to an energy crunch lasting six months or even longer.

Even so, its base-case thinking still leans on accumulation, with emphasis on domestic-facing sectors and selective defensive hedges, while keeping some dry powder ready for sharper dislocations.

It states sectors deemed to be nominally more defensive in such cases include energy, plantations, healthcare, telecommunications, consumer, and real estate investment trusts, or REITs.