KUALA LUMPUR: Bursa Malaysia is poised to extend its near-term recovery as the benchmark index recorded its fifth gain in six sessions on Wednesday, in line with stronger regional markets.
Hong Leong Investment Bank (HLIB Research) said the recovery will be supported by the return of foreign fund inflows, although upside momentum may face resistance after a strong recent rally.
The FTSE Bursa Malaysia KLCI (FBM KLCI) rose 2.7 points to 1,710.9 on Wednesday, marking its fifth gain in six sessions, in line with stronger regional markets.
Heavyweight stocks such as Press Metal Aluminium, Petronas Dagangan, Petronas Gas, YTL Power, CelcomDigi and IHH Healthcare led the positive momentum.
HLIB Research said the key index could encounter overbought resistance in the 1,730 to 1,740 range, after climbing 96 points over the past eight weeks.
"Key events to monitor this week include Malaysia's advance fourth-quarter 2025 gross domestic product (GDP) release on Jan 15, which is expected to grow 4.6 per cent, the US Supreme Court's tariff ruling, and the start of the US fourth-quarter earnings season.
"Escalating geopolitical risks across Iran, Venezuela, China-Japan relations and Greenland may keep sentiment cautious," the firm said in a note.
HLIB Research maintained a constructive medium- to long-term outlook for the local market, underpinned by resilient GDP growth of 4.8 per cent in 2025 and 4.5 per cent in 2026.
It added that the valuations are attractive, with the FBM KLCI trading at a 2026 forward price-earnings ratio of 14.9 times versus its five-year average of 17.2 times.
The market is also supported by a stronger ringgit, which has appreciated about 10 per cent year-on-year and projected core earnings growth of 7.6 per cent in 2026.
These factors support a KLCI target range of 1,750 to 1,770 in the first half of 2026, it said.
HLIB Research said most Asian markets ended at fresh record highs on Wednesday despite an overnight pullback on Wall Street, reflecting resilient risk appetite.
Japan's Nikkei 225 surged 1.48 per cent on renewed snap-election speculation and a weaker yen, which hit an 18-month low against the US dollar, boosting exporter stocks.
China's Shanghai Composite Index slipped 0.31 per cent after authorities raised margin requirements to curb leverage, despite strong fundamentals including a record US$1.25 trillion trade surplus in 2025, firmer December imports and upbeat AI-driven initial public offering (IPO) and earnings momentum.
On Wall Street, US equities declined for a second straight session, with the Dow Jones Industrial Average down 0.1 per cent, the S&P 500 falling 0.5 per cent and the Nasdaq Composite sliding 1.0 per cent, weighed down by weakness in technology and financial stocks amid geopolitical concerns and earnings-related pressures.