Stronger economy sets stage for resilient 2Q corporate earnings despite geopolitical headwinds, say analysts - The Edge Malaysia

KUALA LUMPUR, 10 AUGUST 2026 —

Malaysia's economy is expected to have expanded 5.8% year on year in the second quarter of 2026, setting the stage for resilient corporate earnings despite geopolitical headwinds, according to analysts. The stronger economic performance is attributed to external demand strength, with export-oriented industries recording stronger growth alongside a rebound in the mining and quarrying sector.

The technology and plantation sectors are identified as standout performers, with analysts expecting them to drive earnings growth in the second quarter. MBSB Research head Imran Yassin Yusof is maintaining his forecast of 8% earnings growth for the FBM KLCI stocks, following a better-than-expected first-quarter performance. The aggregate earnings of the benchmark index's 30 constituents surged 61.9% year on year and 101.2% quarter on quarter to RM27 billion in the first quarter.

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, plantation stocks are expected to emerge as dark horses during the second-quarter reporting season. Imran shares a similarly positive view, expecting plantation companies to continue benefiting from favorable crude palm oil (CPO) prices, which have risen more than 10% this year to above RM4,500 a tonne.

RHB Research says that 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, 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.

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. Hong Leong Investment Bank (HLIB) Research expects a more constructive quarter for the technology sector, 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, the research house says appetite remains intact, with investors still looking for attractive ideas to add exposure.

HLIB Research foresees more upbeat sentiment as technology firms may provide firmer 2027 guidance, given strong visibility from their key customers. The optimism is already being reflected in reported earnings, with UWC Bhd seeing its February-April net profit more than triple to RM26.32 million from RM7.96 million a year earlier.

Similarly, Dufu Technology Corp Bhd's 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. Meanwhile, the supply disruptions are expected to propel PETRONAS Chemicals Group Bhd's 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 second-quarter reporting season for the consumer sector, citing higher input costs such as resin following petrochemical supply disruptions.

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

The Middle East conflict has pushed up prices for several agricultural commodities, including wheat, soybeans, and palm oil. However, CIMB Securities says that Nestlé Malaysia's key raw material cost outlook remains favorable, as its key raw materials — coffee and cocoa — continue to trade well below last year's elevated levels.

Dollar-store retail chain Eco-Shop Marketing Bhd 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.

Looking ahead, analysts expect the resilient corporate earnings to continue in the second half of the year, driven by the strong economic performance and favorable sector trends. However, the ongoing geopolitical uncertainties and supply chain disruptions pose risks to the outlook.

As the second-quarter reporting season unfolds, investors will be closely watching the earnings performance of companies, particularly in the technology and plantation sectors, to gauge the impact of the external factors on the Malaysian economy. Details on the specific earnings performance of individual companies will be closely monitored, and any surprises or revisions to guidance will be key factors in determining the market's direction in the coming months.

Related: CIMB · Bursa Malaysia