PETALING JAYA: For Malaysia, 2026 is about execution of approved investments in previous year as projects move from planning to implementation, said Asia Pacific University of Technology & Innovation senior lecturer Dr Ahmad Danial Zainudin.
He said this shift is being supported by improving fiscal discipline, with the government aiming to reduce the fiscal deficit to 3.5% of gross domestic product, which eases pressure on private sector funding.
“Combined with a neutral Overnight Policy Rate of 2.75%, the macro environment resembles a ‘Goldilocks’ scenario,” he told SunBiz.
Ahmad Danial said the ringgit’s resilience, trading below the psychological level of RM4 to the US dollar, has helped keep imported inflation in check without hurting the competitiveness of electronics exporters. “Such stability is attractive to global institutional investors seeking regional safe havens, as lower currency risk and fiscal discipline create a clearer path for capital inflows.”
He noted that private investment has picked up strongly, growing by more than 12% in recent quarters, as companies move ahead with capital spending plans tied to projects under the 13th Malaysia Plan.
“One of the most significant implications for 2026 is the compression of Malaysia’s equity risk premium,” Ahmad Danial said, adding that as fiscal metrics improve, the country’s credit profile strengthens, lowering the risk premium investors demand for holding Malaysian equities.
He said this could support higher market valuations over time and marks a shift from Malaysia being seen mainly as a cheap emerging market to a more credible regional investment hub.
Looking ahead, Ahmad Danial said, Malaysia’s equity outlook remains constructive, with growth increasingly driven by earnings quality rather than headline expansion.
“With GDP growth projected at 4.0% to 4.5%, there is a stable ceiling for corporate revenue. The economy’s move towards higher-value manufacturing and services could allow even moderate growth to translate into stronger profits,” he noted.
Rakuten Trade head of research Kenny Yee said market conditions remained constructive but disciplined by the end of 2025.
“We are seeing steady participation, which is a positive sign for overall market stability. A strengthening ringgit also acts as a solid catalyst attracting the return of foreign funds. In this environment, investors should focus on companies with clear demand drivers, resilient margins and recurring consumption rather than short-term market movements,” he said.
Manulife Investment Management (Manulife IM) portfolio manager, multi asset, Nicole Wong said it remains neutral on Malaysia heading into 2026.
“The government faces little pressure to introduce additional stimulus, as it is on track to meet deficit targets. Bank Negara Malaysia is leaning towards tighter monetary policy given domestic growth dynamics. While Malaysia emerged as the fastest-growing data centre hub in 2025, capacity constraints suggest construction will slow in 2026. Valuations are broadly neutral relative to other emerging markets, with consensus earnings growth of about 7% versus 16% for broader Asia,” she shared.
Manulife IM senior portfolio manager, equities, Kenglin Tan said, “In light of global risks such as inflation and geopolitical tensions, it is crucial to adopt a more mindful approach when identifying investment opportunities.
“For example, within the semiconductor sector and AI-driven MSMEs, the focus should be on companies that demonstrate strong technological capabilities and the capacity to keep pace with advancements in the Generative AI supply chain.”
Building on this, there is significant potential in businesses that help other firms transition to AI-enabled systems particularly, smaller and mid-sized enterprises looking to upgrade their IT infrastructure and capabilities.
“When considering opportunities in Malaysia, a key factor is the management team’s ability to navigate global risks, which requires ongoing monitoring and evaluation of their track record. Furthermore, the impact of global uncertainties can be mitigated by prioritising companies with robust cash flows and healthy balance sheets, ensuring resilience in challenging environments,” said Tan.
