Malaysia - Market Strategy

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Market Strategy

Impacted by the escalation of conflict in the Middle East and U.S.-Israeli military actions, CIMB Securities recently released a strategy report warning that Malaysian contractors and building material players are facing severe risks of profit margin compression.

CIMB Securities has simultaneously lowered its target for the Malaysian stock market, urging investors to exercise caution.

The firm noted that prolonged geopolitical uncertainty will impact related industries through two primary channels:

1. Construction Firms: If the conflict leads to disruptions in maritime shipping or logistics, supply chain interruptions will directly drive up construction costs, leading to shrinking profit margins.

2. Building Material Producers: Energy-intensive industries (such as steel and cement) are extremely sensitive to the prices of coal, scrap steel, and fuel. Volatility in the Middle East will cause these input costs to fluctuate violently, exerting secondary pressure on producers.

Shift from "Offense" to "Defense"

Given the uncertainties brought by the recent U.S.-Israel conflict and U.S. tariff policies, CIMB Securities has adjusted its investment portfolio. The firm lowered its market target, revising the FBM KLCI target for the end of 2026 from 1,772 points down to 1,754 points.

Sector Rating Downgrades:

The Plantation and Building Materials sectors have been downgraded to "Neutral." This is due to previous high gains and the expectation of declining palm oil prices, which limits profit potential.

A Mixed Bag

Despite the turbulent external environment, the endogenous growth of Malaysian companies remains a bright spot.

In the most recent earnings season:

Outperformers: Approximately 25% of tracked companies exceeded earnings expectations (up from 21% previously).

Underperformers: Only 19% of companies performed below expectations.

Leading Sectors: Healthcare, Technology, Banking, and Transportation were the primary growth engines, accounting for half of the top-performing companies.

Top Picks for Volatility

To withstand market fluctuations, CIMB Securities has replaced high-risk assets in its "Top Picks" list with more resilient blue-chip and mid-cap stocks:

Category Core Top Picks

Defensive Blue-Chips KPJ Healthcare (KPJ), Mr DIY (MRDIY), ViTrox (VITROX), Public Bank (PBBANK)

Industry Leaders Gamuda (GAMUDA), Telekom Malaysia (TM), Hong Leong Bank (HLBANK), Tenaga Nasional (TENAGA), Westports (WPRTS)

Mid-to-Small Caps Inari Amertron (INARI)*, Duopharma (DPHARMA), Life Water (LWSABAH), KIP REIT (KIPREIT)

Source: CIMB

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Equity Strategy
Strongest quarterly showing post-pandemic

For the 4Q25 results season, 54%/50% of our stock coverage were within HLIB/consensus expectations, 28%/29% below and 18%/21% above.

Quarterly aggregate core earnings hit a post-pandemic high in 4Q25, though full year 2025 figures only grew by a mere 1% YoY.

Key misses came from Gaming, Healthcare, O&G and Tech, while beats stemmed from Banking, Construction, Plantation, Power-infra and RE.

We now project 2026/2027 KLCI earnings growth of 9.2%/6.1% and maintain our KLCI target at 1,790 (15.5x 2026 P/E).

Source: HLIB

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Trading opportunities emerge in commodity-linked stocks as geopolitical risks mount — Maybank Sector Focus

By Brandon Pang

The conflict could provide trading opportunities in commodities companies such as PETRONAS Chemicals Group Bhd (KL:PCHEM) and Press Metal Aluminium Holdings Bhd (KL:PMETAL) and elevated freight rates could pose upside risk to Westports Holdings Bhd (KL:WRPTS).

The plantation sector could benefit if the crude oil price rally could sustain above US$100 per barrel, as stronger biodiesel economics may accelerate Indonesia’s B50 mandate.

Maybank IB named RHB, SD Guthrie Bhd (KL:SDG) and IHH Healthcare Bhd (KL:IHH) as its preferred stocks, citing strong capital positions, leverage to CPO prices, and resilience to healthcare demand.

Source: theedgemalaysia.com

https://theedgemalaysia.com/node/795770