Rakuten Trade Cuts FBM KLCI Target as Global Risks Intensify

Rakuten Trade lowered its 2026 FBM KLCI target to 1,770, citing debt, rate and currency risks, while maintaining confidence in Malaysia’s earnings outlook and plantation sector.

Rakuten Trade

Rakuten Trade Research has reduced its end-2026 target for the FBM KLCI to 1,770 points from 1,800, citing mounting global macroeconomic uncertainties despite Malaysia’s relatively resilient economic fundamentals.

In its Q3 2026 Market Outlook, the brokerage warned that investors are facing what Head of Research Kenny Yee described as a “Deadly Love Triangle” comprising rising national debt, potential lower interest rates and weakening currencies. According to Yee, the combination of these factors could increase inflationary pressures and create additional risks for global financial markets.

Rakuten Trade noted that major US stock indices have remained resilient despite the prolonged conflict in the Middle East, a trend it believes is becoming increasingly detached from underlying economic realities. The firm also highlighted concerns over growing US federal debt, possible constraints on Federal Reserve rate cuts and the risk of a yen carry trade unwind if Japan raises interest rates.

Against this backdrop, Rakuten Trade continues to favour Asian markets, particularly Hong Kong, where valuations remain significantly lower than those in the United States. The research house believes the region offers a more attractive risk-reward profile for investors seeking diversification.

Malaysia’s outlook remains constructive, supported by projected corporate earnings growth of 5.4% in 2026 and 6.2% in 2027. Plantation has emerged as Rakuten Trade’s preferred sector for 2026, backed by sustained crude palm oil prices and the possibility of weather-related supply disruptions that could tighten global edible oil supplies.

The firm expects the ringgit to remain within the RM3.80 to RM3.90 range against the US dollar should the Federal Reserve proceed with rate adjustments this year.

For the third quarter, Rakuten Trade maintains an overweight stance on banking, construction, consumer, plantation, technology and utilities stocks. Despite recent foreign fund outflows, the brokerage believes Malaysia remains well-positioned within the region due to resilient earnings, currency stability and improving long-term foreign investor participation.