This article first appeared in Capital, The Edge Malaysia Weekly on August 3, 2026 – August 9, 2026

MALAYSIA’S stronger economic performance in the second quarter of 2026 (2Q2026) is expected to underpin another stable earnings season for Bursa Malaysia-listed companies, with analysts identifying the technology and plantation sectors as the standout performers despite geopolitical uncertainties.

Advance estimates show gross domestic product is likely to have expanded 5.8% year on year (y-o-y) in 2Q2026, lifting first-half growth to 5.6% after a 5.4% rise in 1Q2026. The upside surprise was mainly attributed to the external demand strength, with export-oriented industries recording stronger growth alongside a rebound in the mining and quarrying sector.

The period of 2Q2026 will also reflect the full impact of the Middle East conflict, which erupted on Feb 28 following attacks on Iran by the US and Israel. Immediate concerns include supply chain disruptions and higher energy costs arising from the blockage of the Strait of Hormuz, through which about one-fifth of the world’s oil supply passes.

Nonetheless, MBSB Research head Imran Yassin Yusof is maintaining his forecast of 8% earnings growth for the FBM KLCI stocks, following better than expected 1Q2026 performance, which saw aggregate earnings of the benchmark index’s 30 constituents surged 61.9% y-o-y and 101.2% quarter on quarter (q-o-q) to RM27 billion.

Aggregate normalised quarterly earnings were RM18.86 billion, after adjusting for extraordinary items, particularly a massive RM9.2 billion one-off gain registered by Sunway Bhd (KL:SUNWAY).

Rakuten Trade head of research Kenny Yee reckons that the earnings impact of the Middle East conflict is unlikely to be immediate and may only become evident in the second half of the year. Among sectors, he expects plantation stocks to emerge as the dark horse during the 2Q reporting season.

Imran shares a similarly positive view, expecting plantation companies to continue benefiting from favourable crude palm oil (CPO) prices, which have risen more than 10% this year to above RM4,500 a tonne.

In a July 27 note, RHB Research says the El Niño and CPO outlook event affirmed its view that CPO prices are expected to remain supportive, with an upside bias towards the year end when the El Niño effect starts to be seen.

Hap Seng Plantations Holdings Bhd (KL:HSPLANT), for example, may see a jump in earnings this year on the back of higher fresh fruit bunch production and CPO prices, according to CGS International.

“Hap Seng Plantations is the cheapest stock under our Malaysian plantation coverage, trading at below 10 times FY26-27 PER (price-earnings ratio), which we deem attractive given its strong dividend yields of 6%,” it says in a July 24 note.

Technology remains in focus

The technology sector will remain under the spotlight this reporting season as investors reassess their positioning especially since the Bursa Malaysia Technology Index has surged more than 30% this year.

The rally has mirrored gains in global technology stocks, although the sector has recently come under pressure amid concerns over elevated valuations and hefty capital spending commitments.

Even so, Hong Leong Investment Bank (HLIB) Research expects a more constructive quarter for the technology sector (excluding electronic manufacturing services), where positive surprises and upward revisions should feature more prominently than earnings disappointments.

While investors are broadly split between those drawn to the sector’s strong growth trajectory and those who are more cautious about elevated valuations of 30 to 40 times 2027 PER, the research house says appetite remains intact, with investors still looking for attractive ideas to add exposure, particularly names where continued earnings revisions can support valuation multiples — the common ground between both sides.

“Further evidence of the strong appetite is also reflected in market flows — recent share placements were well absorbed [ViTrox Corp Bhd (KL:VITROX), Inari Amertron Bhd (KL:INARI) and Unisem (M) Bhd (KL:UNISEM)] while new tech initial public offering (IPO) listings such as SkyeChip Bhd (KL:SKYECHIP) and Stratus Global Holdings Bhd (KL:STRATUS) continued to see strong institutional participation,” the research house says in a July 23 note.

Going into 2H2026, HLIB Research foresees more upbeat sentiment as technology firms may provide firmer 2027 guidance, given strong visibility from their key customers.

“Semiconductor up cycles tend to progress from a re-rating phase into an earnings upgrade phase — a transition we believe is beginning to play through. Within our coverage, we see the greatest potential for positive earnings revisions and upside to consensus from ViTrox, UWC Bhd (KL:UWC) and Inari Amertron going into the reporting season.”

The optimism is already being reflected in reported earnings. UWC saw its February-April net profit more than triple to RM26.32 million from RM7.96 million a year earlier, as a recovery in the semiconductor industry lifted its revenue to a record high of RM151.46 million.

Similarly, Dufu Technology Corp Bhd’s (KL:DUFU) April-June quarter net profit came in at a record high of RM13.9 million — up nearly fivefold from RM2.8 million a year earlier, buoyed by higher hard disk drive component sales.

Meanwhile, the supply disruptions are expected to propel PETRONAS Chemicals Group Bhd’s (KL:PCHEM) April-June earnings, mainly driven by its fertiliser and methanol segment, according to CIMB Securities.

In contrast, consumer stocks may face margin pressure from higher raw material prices and supply chain disruptions stemming from the Iran war, although consumer staples are expected to remain relatively resilient.

CGS International expects a subdued 2QCY2026F reporting season for the consumer sector, citing higher input costs such as resin following petrochemical supply disruptions, compounded by a lag in passing on these higher costs to consumers.

“Channel checks with the companies under our coverage indicate an increase in diesel costs is not a significant headwind. However, we expect a recovery in 3Q2026, as input costs have normalised with oil prices stabilising. In addition, selling price adjustments implemented in the previous quarter should start to take full effect, supporting margin improvement and earnings growth,” it says in a July 16 note.

The research house adds that continued strong same-store sales growth and additional Sumbangan Asas Rahmah (Sara) cash handouts could serve as re-rating catalysts for the consumer sector, while supply chain disruptions that lead to stock shortages remain a key risk.

Nestlé (M) Bhd (KL:NESTLE), however, delivered another strong set of results, with net profit for April-June quarter rising more than 38% y-o-y to RM155 million, supported by broad-based revenue growth, effective cost management and efficiency gains across the value chain.

While the Middle East conflict has pushed up prices for several agricultural commodities, including wheat, soybeans and palm oil, CIMB Securities says in a July 28 note that Nestlé Malaysia’s key raw material cost outlook remains favourable, as its key raw materials — coffee and cocoa — continue to trade well below last year’s elevated levels, having declined 9.6% and 14.8% year to date, respectively.

“This should help offset broader input cost inflation and support margin resilience,” it notes.

Dollar-store retail chain Eco-Shop Marketing Bhd (KL:ECOSHOP) also posted its highest ever quarterly net profit of RM72.63 million for the March-May quarter, 45% higher than the RM50.12 million posted a year earlier, driven by improved margins and store expansion.

MBSB Research expects a weak results season for the banking sector, with several negative guidance revisions. In a July 15 note, it says downward pressure comes from continuous exacerbation of deposit competition, heavier provisioning due to persistent geopolitical tensions — although asset quality concerns remain manageable — and minimal room for further dividend upside for 2Q2026.

Having said that, it expects these headwinds to ease towards the end of the year.

BMI, a unit of Fitch Solutions, says most indicators suggest that the banking sector remains in adequate health. As of 1Q2026, the aggregate banking system capital ratio stood at 18.1% — considerably higher than the regulatory minimum of 10.5% comprising 8% total capital ratio and 2.5% capital conservation buffer.

While the Common Equity Tier-1 ratio and Tier-1 Capital ratio edged lower in 2025, they remain some way above the Basel III requirement of 4.5% and 6%, respectively.

Rakuten’s Yee expects the construction sector to post improved earnings due to the aggressive rollout of projects.

Domestic contract awards totalled RM16.9 billion in 2Q2026, up 34% y-o-y, bringing the first-half total to RM27.7 billion, driven by data centre-related and public sector jobs. HLIB Research says these gains more than offset weakness in commercial and residential projects, where contract flows fell 46% q-o-q to RM2.7 billion.

The research house adds that investors could gain greater clarity on the rollout timeline for large-scale infrastructure projects under Budget 2027 ahead of the next general election.

The utility sector is also expected to benefit from its structural growth, underpinned by the rapid expansion of data centres, which is driving unprecedented demand for power infrastructure.

In a July 17 note, CGS International says the National Energy Transition Roadmap (NETR) has transformed the sector from a traditionally defensive earnings profile into one offering visible long-term structural growth, supported by sustained investments in power generation capacities and grid infrastructure.

The government’s recent launch of the sixth phase of the Large-Scale Solar programme (LSS6), which is expected to attract private investment of between RM13 billion and RM15 billion, should provide an additional boost to the sector.

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