This article first appeared in The Edge Malaysia Weekly on February 2, 2026 - February 8, 2026

NO hard selling is expected for most consumer stocks this year. The sector outlook remains positive, supported by an anticipated rise in consumption from Visit Malaysia 2026, additional cash handouts under Sumbangan Asas Rahmah (SARA), and continued strength in the labour market and broader economic conditions.

A stronger ringgit against a weaker US dollar has further enhanced the appeal of the consumer products sector, as many companies are likely to benefit from lower input costs. This is further supported by softer commodity prices this year.

The key question is whether it is purely feel-good optimism driving upward momentum or are there solid reasons that consumer product stocks can scale higher?

CIMB Securities head of research Ivy Ng believes the consumption story could continue to push consumer stocks higher.

“The consumption story may have a bit more legs from budget measures announced last year and the stronger ringgit,” she says. CIMB Securities’ stock picks include 99 Speed Mart Retail Holdings Bhd (KL:99SMART), Mr DIY Group (M) Bhd (KL:MRDIY), AEON Co (M) Bhd (KL:AEON) and Farm Fresh Bhd (KL:FFB).

Visit Malaysia 2026 has been identified as a key driver of consumption this year, with the government’s commitment underscored by a RM700 million allocation for the tourism industry, in addition to various incentives. Malaysia is targeting an ambitious 47 million foreign visitors this year.

Kenanga Research head of research Peter Kong says the house likes the angle of the Tourism Malaysia play, where it is expecting 30 million tourists, exceeding previous highs.

“Seventy per cent of tourism spending is driven by retail and F&B (food and beverage), and we expect a repeat of beverage names doing relatively well in sales improvement, as was the case in Visit Malaysia Year 2014. Our main pick is Fraser & Neave Holdings Bhd (KL:F&N) for Tourism Malaysia,” he explains.

UOB Kay Hian Research, in a Jan 15 sector report, also named F&N as a key beneficiary of Visit Malaysia 2026. It said the isotonic drink 100PLUS is poised to capture incremental tourism-driven consumption in Malaysia’s hot climate, while its dairy portfolio — including condensed and evaporated milk — should benefit from sustained demand across hawker channels and the broader food service trade. Based on its 2025 annual report, about 40% of F&N’s revenue is derived from Malaysia.

The research house also sees F&N being the key beneficiary of the softening commodity prices, with sugar and milk powder accounting for about 40% of its cost of goods sold.

F&N’s share price has increased 37.2% over the period of one year, closing at RM34.42 last Thursday. It has a trailing 12-month (TTM) price-­earnings ratio (PER) of 24.8 times, coming in lower than the likes of Nestlé (M) Bhd’s (KL:NESTLE) 62.4 times and Farm Fresh’s 43.9 times.

With companies generally re-hedging their position towards the tail end of the year as well as lower prices and inventory holding levels, UOB Kay Hian said gross margins may firm up towards mid-2026.

Also fuelling optimism among selected consumer products since the third quarter of 2025 are the additional cash handouts. Budget 2026 saw an increase in allocation of the Sumbangan Tunai Rahmah (STR) and SARA to RM15 billion, from RM13 billion in the previous year.

All Malaysians are eligible for a second round of “one-off” payments of RM100 under SARA come Feb 9 this year, following the first edition on Aug 31, 2025.

One counter that has been touted as a big beneficiary of the cash handouts is 99 Speedmart. Over a six-month period, the stock gained 73.5% from RM2.31 on July 29, 2025, to RM4 on Jan 29, 2026. It has gained 84% over one year.

While many investors are still excited about the SARA play, Kenanga’s Kong is more cautious. “When we examine the share price movements for the names commonly associated with SARA1.0 and SARA2.0 — such as Nestlé, 99 Speedmart and Eco-Shop Marketing Bhd (KL:ECOSHOP) — only 18% to 25% of the surge in share price since the SARA programme is attributed to earnings increase, whereas PER expansion explained the lion’s share,” he says.

Kong believes the benefits from the latest round of SARA could be more diluted for these names, owing to increased participation from smaller retail shops. This could lead to a rotation of names such as Mr DIY and AEON into consumer laggards, following the latest round of SARA handouts, he adds.

So far this year, Mr DIY has led in share price gains, rising 18% to RM1.83 on Jan 29. On a one-year basis, the stock is up 18.5%. The group seems to be a firm favourite among analysts, with 14 “buy” calls, two “hold” and one “sell” at an average target price of RM1.96.

In contrast, AEON has seen its share price falling 13.1% over the one-year period, but it has made gains year-to-date, gaining 16.67% as it closed at RM1.26 on Jan 29. MBSB Research has a “buy” call on the stock with a target price of RM1.66, on account of its defensive mass-market exposure and stable property management services income.

RHB Research also favours the stock, putting a target price of RM1.46 on AEON with a “buy” call, as improved consumer sentiment is expected to support the department store operator’s extensive nationwide footprint.

Considering all these factors — alongside the 11-year low unemployment rate of 2.9% as at November 2025 and the stronger ringgit — Malacca Securities head of research Loui Low believes domestic demand and consumption activities are set to receive a boost.

“The strong ringgit will be good for [consumer product companies] to procure items internationally, which will reduce costs and boost their earnings,” he says.

The ringgit has strengthened substantially over the last year against the US dollar, which has been weakening. At the time of writing, the ringgit was hovering at 3.94 against the greenback, after breaching the 4.00 level on Jan 23.

The ringgit has strengthened not only against the greenback but also other major currencies in the past year, including the Chinese yuan.

Mr DIY and Eco-Shop are expected to benefit from the appreciation of the ringgit against the yuan while F&N and Farm Fresh will be beneficiaries from the ringgit’s strength against the US dollar.

Some believe, however, that most, if not all, of the optimism for the sector could already have been priced in.

UOB Kay Hian said sector valuations, which have outperformed the broader index since August 2025, appear to have largely priced in positives such as the government cash handouts and Visit Malaysia 2026.

While sustained moderation in input costs and the ringgit appreciation could provide incremental tailwinds for the sector in 2H2026, the research house emphasised that these instances are “isolated and not sector wide”, adding that it does not justify a sector upgrade.

“Sector earnings are projected to grow a modest 7.8% in 2025 and 9.2% in 2026, balanced against valuations trading at 26 times one-year forward PER — equivalent to -1.0 SD (standard deviation) from the five-year mean — reflecting the sector’s structural de-rating over the years with the sin sector and the likes of Nestlé and QL Resources [Bhd (KL:QL)],” it said. UOB Kay Hian has a “market weight” or “neutral” call on the sector.

The research house has a “hold” call on both Nestlé and QL Resources, with target prices of RM103 and RM4.40 respectively.

Nestlé’s share price has gained 27.9% over the past year to close at RM114 on Jan 29, giving the company a market valuation of RM26.73 billion. With a trailing 12-month PER of 62.4 times, it is at its highest level since 2020. Its TTM dividend yield stands at 1.8%.

Meanwhile, QL Resources has declined 6.2% over the past year, closing at RM4.10 on Jan 29, with a market capitalisation of RM14.97 billion. The integrated agro-based group has a trailing 12-month PER of 34.3 times, placing it among the highest in the poultry and egg producer industry.

Nevertheless, Nestlé is one of the top picks in the consumer product sector for RHB Research, whose market strategy is to lean towards names with defensive qualities and domestic-centric earnings to avoid prevailing external risk.

The research house says this is on account of the company’s robust forecast three-year earnings compound annual growth rate (CAGR) of 17%, which should be driven by the normalisation in sentiment towards its brands, margin recovery on moderating input costs and favourable foreign exchange rates, as well as growing export sales. Based on the current price of RM114, there is 18.42% upside to RHB’s target price of RM135 on the counter.

RHB also favours Farm Fresh, assigning a target price of RM3.26, citing its regional expansion as a driver of long-term growth potential. In the near term, earnings are expected to be supported by the new ice cream production capacity in 2026 and a higher gross profit margin.

The group, whose financial year end is Sept 30, has seen its gross profit margin improving in the last three financial years, from 26.6% in FY2024 to 32.1% in FY2025. It was in the 33% range in the most recent two quarters of FY2026.

Farm Fresh’s share price has gained 70.7% over the period of one year and risen close to 4% year-to-date. It closed at RM2.88 on Jan 29, valuing the company at RM5.43 billion.

The Bursa Consumer Products and Services Index (KLCSU) is reflecting the optimism of the sector. Year-to-date, it has increased 4.7% as at Jan 28 and risen 7% over the period of one year.

Of the 175 constituents on the index, seven stocks make up about half of the index weightage.

The seven, which are also constituents of the FBM KLCI, are 99 Speedmart, Nestlé, Petronas Dagangan Bhd (KL:PETDAG), Mr DIY, PPB Group Bhd (KL:PPB), QL Resources and Sime Darby Bhd (KL:SIME).

99 Speedmart has the highest weightage in the index at 11.6% and Nestlé comes in at 9.5%. AmInvestment Research highlights that these large consumer staples trade at high multiples, owing to a scarcity premium.

“Investors are willing to pay more for strong earnings visibility, especially during the current geopolitical uncertainty,” it says in a recent report.

With heavyweight 99 Speedmart’s share price rising 84% over the past year, and most other constituents also posting gains — except for QL Resources and PPB — it is clear why the index has climbed 7% during the same period.

This year, the FBM KLCI has continued its upward trend, notably rising to 1,771.25 on Jan 27. Analysts attribute the gains to higher foreign net inflows, supported by a stronger ringgit, alongside better-than-expected preliminary 4Q2025 economic growth.

While there have been a few standouts in foreign inflows, such as Mr DIY, interest has largely been directed towards the banking sector, says Kenanga’s Kong. “There has yet to be a broadening-out effect at the moment, with some sectors continuing to be weak, such as technology and industrial,” he adds.

Analysts believe the benchmark FBM KLCI could surpass 1,800 points, driven by a rotation of foreign funds into Malaysia amid a stronger ringgit. The index’s all-time high stands at 1,895.18, reached on April 19, 2018.

Could the FBM KLCI hit 1,900 points? Malacca Securities’ Low considers that a stretch, while Kenanga’s Kong says it is “not likely”, noting that it would require the index to trade more than +1 SD above historical average PER levels — “unless Malaysia concurrently surprises on economic and earnings growth prospects”.

Just a month into 2026, Malaysia’s ability to exceed expectations is still unfolding.   

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