The FBM KLCI fell 57.96 points, or 3.4% month-on-month, in June 2026 weighed by foreign fund outflows, a stronger U.S. dollar and rising domestic political uncertainty.
The Ringgit is likely to remain under near-term pressure amid a hawkish U.S. Federal Reserve, weaker regional currency performance and rising domestic political uncertainty ahead of the Johor and Negeri Sembilan state elections.
A weaker ringgit favours export-oriented sectors, particularly Technology and Gloves, while sectors with significant USD-denominated costs, including Construction, Aviation, Autos and Consumer, are likely to face margin pressure.
The Johor and Negeri Sembilan state elections will be closely watched as an early indicator of political dynamics ahead of GE16 and could influence investor sentiment toward Malaysian assets.
Maintain our FBM KLCI year-end target of 1,787, supported by expectations of easing geopolitical risks, resilient domestic fundamentals and the potential start of a new market upcycle.
Our top picks are Mi Technovation (BUY, TP: RM6.23), EG Industries (BUY, TP: RM2.69), MSC (BUY, TP: RM3.06) and MITRA (BUY, TP: RM1.28).
Key events in June 2026 affecting the market
Global
10 Jun: Japan's meteorological agency declared the onset of El Niño, raising the risk of extreme weather, agricultural disruptions and economic losses through the end of the year.
11 Jun: ECB raised interest rates by 25bps.
11 Jun: 2026 FIFA World Cup kicked off, boosting sectors such as consumer goods, travel and beverages globally.
12 Jun: A U.S. federal appeals court allowed the Trump administration to continue enforcing its 10% global tariffs while legal challenges remain ongoing.
13 Jun: SpaceX shares surged 19% on their Nasdaq debut, pushing its market value above US$2 trillion following a record US$75 billion IPO.
17 Jun – FOMC Meeting (Kevin Warsh's first meeting as Fed Chair): The Fed kept rates unchanged at 3.50%-3.75% but adopted a hawkish tone, raising concerns of a potential rate hike later this year.
15–23 Jun: The U.S. and Iran agreed to a 60-day ceasefire framework and a 14-point roadmap, paving the way for negotiations on sanctions relief, the Strait of Hormuz and Iran's nuclear programme. The U.S. subsequently granted a temporary waiver on Iranian oil exports, supporting expectations of improved global oil supply and easing geopolitical risks.
Late Jun (28–30 Jun): The US and Iran agreed on a ceasefire framework, easing geopolitical tensions and improving global market sentiment.
Malaysia
6 Jun: Melaka Chief Minister Ab Rauf Yusoh said the Melaka state election is likely to be held after the Johor and Negeri Sembilan state polls.
8 Jun: Crisis Management Task Force chairman Tan Sri Mohd Hassan Marican said Malaysia must strengthen resilience against prolonged global supply disruptions through government action, greater efficiency, resource conservation, and public cooperation.
9 Jun: Bursa Malaysia and the Securities Commission launched the MY Value Up Programme Guidebook to enhance corporate governance and shareholder value, with EPF, PNB and KWAP supporting companies that adopt its recommendations.
12 Jun: The Election Commission confirmed the 16th Johor and Negeri Sembilan state elections, with polling scheduled for 11 July 2026 and 1 August 2026, respectively.
Foreign investors remained net sellers in June, recording net outflows of RM2.4bn, although selling moderated from RM3.7bn in May. While a brief net inflow was recorded on 29 June, foreign investors ended the month with cumulative year-to-date net outflows of RM3.1bn.
Fundamental Outlook and Key events to watch in July 2026
Global
Key market-moving events in the U.S. include the June unemployment rate report on 2 July, June CPI inflation data on 14 July, June PPI data on 15 July, and the FOMC meeting on 28–29 July. These releases will play a crucial role in shaping expectations for the Federal Reserve's policy direction and the timing of any potential interest rate adjustments.
Federal Reserve Policy Outlook – Investors will continue to monitor the Fed's policy trajectory following Chair Kevin Warsh's hawkish stance. Markets are increasingly pricing in a higher-for-longer interest rate environment, with Fed Funds futures implying the possibility of at least two further rate hikes. For a more detailed discussion, please refer to our report, US FOMC Meeting: Hawkish Tilt as Fed Commits to Price Stability (18 June 2026).
Middle East Geopolitical Developments – We believe the worst of the Iran–U.S. conflict is behind us. This aligns with the view expressed in our Economics & Market Outlook report, Buy the Dip on Geopolitical Noise (5 March 2026), where we highlighted that market sell-offs triggered by geopolitical tensions often present attractive opportunities to accumulate fundamentally strong companies. Barring any renewed escalation, geopolitical and macroeconomic uncertainties arising from the conflict should continue to ease, reducing risks to global energy markets and investor sentiment.
Malaysia
The ringgit has been among the weakest-performing currencies in the region against the U.S. dollar, depreciating 4.5% since the beginning of May to a recent peak closing level of 4.149, significantly underperforming the broader Asia Dollar Index (ADXY), which declined just 1% over the same period.
From the technical perspective, the USD/MYR has recently broken above a descending trendline that had been in place since April 2024, signalling a potential reversal of the Ringgit's strengthening trend against the US dollar. The breakout, coupled with improving upward momentum, suggests further near-term upside for the USD/MYR, with immediate resistance seen at 4.20 and 4.30. This technical development supports our view that the Ringgit may face renewed depreciation pressure should the US dollar strengthen further amid a relatively hawkish Federal Reserve stance.
At the same time, increasing local political uncertainty surrounding the Johor and Negeri Sembilan state election could weigh on investor sentiment and limit support for the Ringgit, particularly if concerns emerge over its implications for the broader political landscape ahead of GE16.
That said, the impact on corporate earnings is likely to remain manageable unless the Ringgit weakens further towards the 4.40–4.50 range against the US dollar. At current levels, most export-oriented companies are unlikely to see a material earnings uplift, while import-dependent sectors should remain largely insulated from significant margin pressure. A more pronounced depreciation towards 4.40–4.50 would be required before currency movements become a meaningful earnings driver for Malaysian corporates.
Winners and Losers of a Weak Ringgit against the Greenback
In our view, a weaker ringgit would generally favour export-oriented sectors and companies with substantial USD-denominated revenue, particularly those with a meaningful portion of their cost base in ringgit. The key beneficiaries are likely to be sectors such as Gloves and Technology, where revenue is predominantly USD-based while a significant share of operating costs is incurred in ringgit, providing a natural earnings uplift from currency translation. Companies in the commodities space, including upstream O&G, petrochemicals and aluminium producers, may also benefit as their products are largely priced in USD. Plantation companies could similarly see positive earnings translation effects given that CPO prices are closely linked to global commodity markets.
On the other hand, a weaker ringgit is generally negative for sectors that incur significant USD-denominated costs while deriving most of their revenue in ringgit. These include Aviation, where jet fuel, aircraft maintenance and lease expenses are largely USD-linked; Autos, due to the importation of CBU vehicles and CKD kits; Cement, given its exposure to imported coal; and Construction, particularly for projects requiring imported equipment and specialised M&E components. Consumer companies that rely on imported raw materials or merchandise may also face margin pressure unless higher costs can be passed on to customers. Similarly, Media companies with foreign content costs, Renewable Energy EPCC contractors that procure imported solar modules, and Telcos with USD-linked network capex and software licensing expenses could see profitability impacted.
In addition, companies with substantial USD-denominated borrowings may face higher finance costs and foreign exchange translation losses in the absence of adequate hedging arrangements.
For investors who are interested to capitalize on the trading opportunity, we prefer the Glove and Technology sectors. MSC and Southern Cable may also attract interest.
Having said that, our economist expects the US federal funds rate (FFR) to be hiked by 25bp this year, less hawkish than the Fed Funds futures expectations of at least two hikes. This is based on the expectation that inflationary pressures will gradually ease as lower energy prices temper headline inflation, reducing the need for a more aggressive tightening cycle despite the Fed's increased focus on restoring price stability.
Closer to home, we maintain our view that BNM will keep the OPR unchanged at 2.75% through 2026 to preserve growth. The extent of spillovers from elevated crude oil prices into broader inflation, alongside the resilience of domestic demand, will remain key policy considerations.
Johor & Negeri Sembilan Polls: A Test of Coalition Strength Ahead of GE16
The Johor and Negeri Sembilan state elections will serve as an important gauge of voter sentiment ahead of GE16 and may have broader implications for the political dynamics within the Unity Government. While the elections are unlikely to alter state-level policy direction significantly, the relative performance of UMNO and PH will be closely scrutinised as an indicator of bargaining power within the coalition. Given the underlying tensions between the two parties and the absence of a long-term coalition framework, a strong showing by either side could reshape strategic considerations regarding candidate allocations, coalition arrangements and the timing of the next general election. As such, investors should view these elections not simply as state contests, but as an early test of the political landscape heading into GE16. We expect GE16 to be held during the second half of 2026.
Maintain KLCI target at 1,787. The local bellwether index and the ringgit have generally moved in tandem over the past decade, with both weakening during periods of heightened market uncertainty and recovering as investor sentiment improved (Figure 2). Retain our KLCI target at 1,787 based on our Elliott Wave framework (Figure 3). With the complex WXY correction likely complete, we expect the index to transition into a new five-wave impulsive uptrend. Our top picks are Mi Technovation (BUY, TP: RM6.23), EG Industries (BUY, TP: RM2.69), MSC (BUY, TP: RM3.06) and MITRA (BUY, TP: RM1.28).
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.079748 | 4.111398 |
| EUR | 4.661928 | 4.665651 |
| CNY | 0.601977 | 0.602458 |
| HKD | 0.520350 | 0.523881 |
| SGD | 3.147313 | 3.168788 |