KUALA LUMPUR, Jan 23 (Bernama) -- Bursa Malaysia’s benchmark index recouped earlier losses to settle higher, maintaining a more than six-year high, buoyed by continued buying interest in technology stocks, while the strengthening of the ringgit against the US dollar further lifted investor sentiment. At 2.27 pm today, the local currency strengthened to 3.9992 versus the greenback, its strongest level in more than seven years. It was last seen at this level on June 18, 2018, at 3.9960/9990. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 2.85 points or 0.17 per cent to 1,719.99 from yesterday’s close of 1,717.14. The index surpassed its previous peak of 1,719.00 recorded on Feb 26, 2019. The barometer index opened 1.30 points lower at 1,715.84 and moved between an intraday low of 1,711.89 in early trade and a high of 1,723.41 in late afternoon before slipping slightly toward the close. However, market breadth was negative with decl...
Malaysia’s banking sector is in a stronger position in 2026 than before the pandemic, and remains well supported for further gains despite the recent rally in bank share prices, according to MBSB Research.
The research house believes banks continue to offer attractive risk-reward, supported by Malaysia’s improving economic outlook and relative stability compared with neighbouring markets. With fundamentals strengthening across the board, foreign investor interest is expected to remain a key valuation driver.
Why the Banking Sector Still Looks Attractive
MBSB Research highlights several structural improvements that set the sector apart from previous cycles:
Stronger balance sheets and capital buffers
Improved asset quality at multi-year highs
Better cost discipline and operational efficiency
More disciplined management and clearer regulatory visibility
Despite higher valuations, earnings quality has improved, making current price levels more defensible.
Dividends Continue to Anchor Valuations
Dividends remain a major draw for investors:
Banks are holding excess capital, partly due to clearer regulatory frameworks
Some banks have already paid special dividends
Others have signalled higher payout ratios going forward
Key point: Dividend yields remain attractive, providing downside support in volatile markets.
Earnings Drivers Shifting Beyond NIMs
Looking ahead, earnings growth is expected to become more diversified:
Fee income to play a larger role, led by:
Wealth management
Bancassurance
Capital market services
Investment income likely to moderate as interest rates stabilise
Corporate and commercial loans to continue offsetting softer retail demand
Construction & Business Lending as 2026 Catalysts
Loan growth in 2026 is expected to be supported by:
Construction-related financing, driven by large infrastructure projects
Stronger private sector activity, particularly in Johor
Gradual recovery in working capital loans as companies resume spending and restocking
MBSB expects improved domestic conditions to encourage businesses to re-enter expansion mode.
Liquidity: A Watch Point, Not a Red Flag
System loan-to-deposit ratio is at record highs
Liquidity could tighten gradually over time
However, banks are increasingly using alternative funding sources, helping to manage funding risks
Sector View & Top Picks
MBSB Research maintains a positive stance on Malaysia’s banking sector, citing strong fundamentals, stable growth prospects and continued foreign inflows. The research house also sees rising interest from multinational companies choosing Malaysia as a regional production and sourcing hub.
Top banking picks:
Hong Leong Bank Bhd
Public Bank Bhd
Investor Takeaway
Malaysia banks are structurally stronger than pre-pandemic
Dividends and foreign inflows remain key support
Construction and corporate lending could drive the next leg of growth
Sector remains a core defensive-growth play for 2026
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