Market valuation supported by excess liquidity

In its 1H2026 Market Strategy, Public Investment Bank emphasised that market valuation is being supported by excess liquidity in the system

But the underlying global economy remains fragile and susceptible to shocks.

” In March, we experience a broad base asset repricing in the global market following the breakout of the Middle East conflict, while liquidity remains ample as M2 money supply continues to increase. Inflationary fear has never really dissipated, though global inflation was largely contained throughout 2025 despite the trade war.

“We believe the conflict in the Middle East would be a protracted one as demands from the US/Israeli and Iranian governments seem impractical and unacceptable to either side,” is said in its latest market report.

Excess liquidity

The analyst firm says a prolonged standoff resulting in restrictive supply of oil could summon stagflation, which is a combination of high inflation, stagnant growth and weak job market.

“As a structural hedge against this risk, we continue to advocate exposure to commodity-related sectors, be it hard or soft commodities.

“Our top picks are Malaysia Smelting, Bumi Armada, Hibiscus, Kossan and Ta Ann. We also like defensive play such as healthcare and banking.”

Medical tourism and demand for healthcare services should sustain IHH’s earnings while higher inflation may prompt interest rate hike, not in the near term, but perhaps in 2027. CIMB and Maybankremain our favourite picks.  We maintain our end-2026 KLCI target of 1,730, it adds.

#businessnews