Maybank Investment Bank (Maybank IB) said the upcoming Q2 results season may be muted, reflecting challenges from external uncertainties, particularly the ongoing US-Malaysia tariff negotiations.

“The Q2 results season may yet be another unexciting one but at least one with fewer earnings downgrades,” it said in a strategy note.

The research house forecasts a modest 2.5% earnings growth for the FBM KLCI this year, primarily weighed down by the banking sector. However, it anticipates a stronger rebound in 2026 with a projected growth of 7.7%.

It has a base case target of 1,660 points for the FBM KLCI, pegged to 14.4 times 2026 estimated price-to-earnings ratio (PER).

“Our base case assumes further de-escalation in trade tensions and favourable outcome from tariff negotiations,” it added.

Some bright spots

Despite the softer external environment, Maybank IB said there are “bright spots” to be found.

It noted Malaysia’s domestic economic fundamentals appear encouraging, pointing to robust consumer activity, a sustained investment cycle, and signs of resilient private demand as cushioning the impact of weaker exports.

The economy grew at 4.5% in Q2, slightly faster than the 4.4% year-on-year growth in Q1 as resilient consumer demand offset weaker exports.

This suggests a steady growth momentum and indicates external headwinds due to US tariffs are being mitigated by domestic tailwinds, it noted.

Maybank IB said investors should watch out for weakness in the technology sector. Banks are “unlikely to yield much surprise” even as it watches for lower loan growth.

However, it expects some positive momentum for construction, healthcare, property, and more selectively, the oil and gas, and utilities sectors.

It said most plantation companies would be weaker quarter-on-quarter due to lower crude palm oil prices, though some could book gains from disposal and forex exchange movements.

Consumer and real estate investment trusts are expected to be softer, after a seasonally strong first quarter.