By Abdul Hamid A Rahman
KUALA LUMPUR, July 1 (Bernama) -- HSBC Private Bank and Premier Wealth has set a year-end target of 1,850 points for the FTSE Bursa Malaysia KLCI (FBM KLCI), implying about 10 per cent upside from current levels.
Its incoming chief investment officer for Asia, Desmond Kuang, said the bank remains neutral on Malaysian equities but sees room for the benchmark index to strengthen.
“Most of the upside would likely come from corporate earnings growth rather than valuation gains, as the Malaysian equity market is currently trading within its fair historical range of around 15 times earnings,” he said at HSBC’s third quarter 2026 investment outlook session with the media today.
He said the market’s prospects would continue to be supported by energy-related counters, given Malaysia’s exposure to oil and chemicals, as well as selective opportunities from the artificial intelligence (AI) trade, including data centre expansion and the semiconductor supply chain.
As for the country’s gross domestic product (GDP) outlook, Kuang said HSBC maintains its full-year 2026 GDP growth forecast at 4.5 per cent, as domestic inflation has remained largely benign, with generous subsidies helping to keep petrol prices at bay.
“Malaysia’s GDP expanded by 5.4 per cent year-on-year in the first quarter, moderating from the above 6.0 per cent pace recorded in the fourth quarter of 2025.
“We think this slowdown reflects normalisation following an exceptionally strong quarter rather than any significant loss of momentum,” he said.
On the external front, Kuang said the ongoing West Asia conflict underscores Malaysia’s advantage as an energy exporter.
“While Malaysia remains a modest net importer of crude oil, it is a major net exporter of natural gas, positioning the country favourably in the current environment.
“Despite external volatility, resilient domestic GDP growth and steady corporate earnings are providing support for the Malaysian equity market. We see more balanced risk ahead and retain a neutral outlook,” he said.
On the investment outlook for Asia, Kuang said that as investment in AI accelerates globally, Asia is well placed to benefit given its leadership in semiconductors and rapid progress in large language models.
“Beyond AI, investors can also find a broadening opportunity set through income potential in bonds, alongside continued improvements in corporate governance reforms across Japan, South Korea, mainland China and Singapore,” he said.
Meanwhile, Universiti Teknologi MARA (UiTM) Faculty of Business and Management senior lecturer Dr Mohd Iqbal Mohd Noor told Bernama that it is very important for Malaysia to strengthen its corporate governance standards.
He said investment competition is shifting from low-cost production and basic capital investment towards higher-value sectors such as AI, data centres and advanced manufacturing.
“In markets that focus more on quality than quantity, investors look for transparency, policy consistency and credible institutions.
“Strong corporate governance reduces perceived investment risk and gives investors confidence that their long-term capital will be protected,” he said.
Therefore, Mohd Iqbal said, stronger corporate governance can help Malaysia attract not only more foreign investment, but also better-quality investment that brings technology transfer, skilled employment and stronger local industry participation.
-- BERNAMA
