The first quarter (1Q26) reporting season for 2026 was undeniably weak, led by a surprisingly poor set of results from the banking sector as well as the consumer sector. Banking stocks like Malayan Banking Bhd and CIMB Group Holdings Bhd reported negative earnings growth year-on-year (y-o-y) of 4.1% and 2.9%, respectively. Bucking the trend, RHB Bank Bhd recorded a strong performance with a solid 14.2% y-o-y growth in net earnings.
Source:
https://de.wikipedia.org
Among FBM KLCI stocks, outstanding earnings growth was seen in the telecommunications sector. In the utility sector, Tenaga Nasional Bhd saw a decent growth in earnings of 5.5% y-o-y, but YTL Power International Bhd posted a significant 42% drop in profits, namely driven by lower margins. Other notable surprises among FBM KLCI-linked companies were the lower earnings by newly listed Sunway Healthcare Holdings Bhd, due to one-off listing expenses as well as higher operating expenses. However, Press Metal Aluminium Holdings Bhd continues to ride the rise in commodity prices, as its earnings jumped 35.2% y-o-y on the back of higher aluminium prices.
Among plantation companies, Kuala Lumpur Kepong Bhd reported a weaker core profit, dragged by lower plantation earnings, while SD Guthrie Bhd’s earnings were impacted by lower profits from its upstream division. However, IOI Corp Bhd’s earnings were firmer by about 10% due to higher output and better oil extraction rate.
Although
corporate earnings showed a decent growth of 3.6% y-o-y for 1Q26, the pace of
increase was slower than the preceding quarter’s 7.5% y-o-y growth.
On a quarter-to-quarter (q-o-q) basis, after expanding by 4.2% in the preceding quarter, earnings momentum reversed with contraction of 3.5% q-o-q.
Most brokers lowered their FBM KLCI target, with consensus now looking at 1,766 points as the new fair value, against 1,775 points in the preceding quarter, based on earnings growth of approximately 7.9% for 2026 and a market price earnings multiple of 15.3 times. For 2027, earnings growth has been lowered marginally from the previous estimate of 7.5% to 6%.
The closure of the Strait of Hormuz and the prolonged war in Iran have taken a toll on the global economic outlook. Countries have utilised their strategic petroleum reserve to offset supply uncertainties. The supply chain disruption will also take a toll on other commodities and goods that are imported from the region.
The Organisation for Economic Cooperation and Development (OECD) recently lowered its 2026 global economic growth outlook to just 2.8% from the 3.6% that was achieved in 2025, while growth for 2027 is now projected at 3.1%. The OECD further warned that under a “prolonged disruption”, which assumes that the current disruptions to energy production and exports in the Gulf economies persist well into 2027, global growth may even slow to just 2.1% in 2026 and 1.8% in 2027.
The
elevated global oil price has also become a hot potato for the Federal
Government to manage, as it has vowed to keep the current subsidy price, while
ensuring that it maintains its fiscal prudence and does not raise the federal
government’s debt level. A tough balancing act.
Given the external and domestic headwinds, the upcoming 2Q26 reporting season will remain a subdued quarter, and with the supply disruption and elevated global oil prices, a slower economic growth is likely to follow suit.
Reference:
Muted 1Q26, weaker growth ahead, Pankaj C. Kumar, The Star, 13 June 2026
No comments:
Post a Comment