KUCHING: A 1,780 FBM KLCI target for the end of 2026 is back on the table as the ringgit strengthens and the return gap widens in favour of equities.
AFFIN Group Research Head, Loong Chee Wei, said the index is up 2 per cent year-to-date and is at 1,715 currently.
He said last year’s foreign positioning showed investors preferred to take risk, and he is watching whether that mix begins to change.
“Last year, for the first 11 months, we did see an inflow of 22.6 billion ringgit, although there was an outflow from the equity markets to the tune of 22.3 billion ringgit,” he said during the AFFIN Group Market Outlook and Chinese New Year Celebration Dinner 2026 held at Sheraton Hotel Kuching recently.
He added that currency direction can act as a sentiment signal when it reflects where foreign funds are allocated.
“And generally, with the strength of the ringgit, a lot of it is coming from the inflow of foreign funds into the bond market, but this year, if you look at the ringgit strengthening, that will improve sentiment on the Malaysian market,” he said.
Loong said the equity case strengthens when investors start comparing returns across assets rather than staying parked in safety.
“Generally, we do expect more funds in equities because there’s an earnings yield gap that’s widening, indicating that investing in equities will give you a higher return than investing in bonds,” he stated.
Loong cautions that easing deposit rates can also change behaviour, because dividend income becomes a more direct benchmark for cash.
“And because 12-month FD rates have been coming down, then it makes sense to put cash to use and invest in the equity markets for even dividends.
“In Malaysia, dividend yields are about 4 per cent on average,” he said, adding that liquidity conditions matter as well, because more money in the system tends to increase the search for higher returns.
“Generally, you can see that the money supply has been expanding, and that would see people wanting to put more money into the equity markets for higher returns,” he added.
