Rakuten Trade is maintaining its end-2026 FBM KLCI target at 1,770, despite around RM2 billion of net foreign selling in August, as it sees power and grid-related earnings providing clearer visibility into year-end than renewed semiconductor optimism ahead of Budget 2027.
The FBM KLCI has traded largely within the 1,700-1,740 range since late August, slipping below 1,710 in the first week of September. Rakuten Trade Research noticed that foreign investors were net sellers of around RM2 billion in August, reversing the buying trend seen in July. Local retail investors, meanwhile, remained net buyers for a fourth consecutive month.
“The market is being held up by domestic money, that largely follows earnings visibility rather than announcements. We are keeping our 1,770 target because recent results season depicted growth remains intact with utilities being one of the contributors and — they sit in the grid, not in the chip cycle,” said Kenny Yee, Head of Research at Rakuten Trade.
Grid investment offers clearer earnings visibility
Rakuten Trade sees Malaysia’s ongoing investment in power infrastructure as a key earnings catalyst into year-end and beyond.
Tenaga Nasional’s grid capital expenditure program rises to RM43 billion for 2025-2027, compared with RM21 billion spent across 2022-2024. Further investment is expected through 2030 as the national grid is upgraded to support renewable energy, battery storage and rising electricity demand, including those from data centres.
The government has also identified energy transition as one of five priority sectors for Budget 2027, alongside semiconductors, the digital economy, artificial intelligence and Islamic finance.
“A semiconductor order book can turn within a quarter. A grid programme running to 2030 cannot. The money is committed and the work is sequenced. Earnings are then showed up within the companies involved usually within the utility and construction segments,” said Yee.
Rakuten Trade believes the opportunity extends beyond traditional renewable-energy plays, with grid expansion requiring sustained investment in transmission, substations, electrical systems and related engineering works.
Three preferred beneficiaries
Rakuten Trade’s preferred exposure to the theme spans the utility operator and companies further down the infrastructure value chain.
Tenaga Nasional (TENAGA): Target Price: RM17.00
As the owner and operator of Malaysia’s electricity transmission and distribution network, Tenaga Nasional is positioned to benefit directly from continued grid investment and rising electricity demand. Growing data center capacity provides an additional long-term demand driver, while stock offers an estimated dividend yield of around 3.5%.
Kee Ming Group (KEEMING): Target Price: RM1.30
Kee Ming Group provides mechanical and electrical engineering services and has an unbilled order book of approximately RM151.9 million. Its strategic shareholder relationship with Solarvest Holdings provides additional exposure to Malaysia’s developing energy infrastructure.
Gamuda (GAMUDA): Target Price: RM5.30
Gamuda’s RM55.4 billion outstanding order book provides multi-year earnings visibility across domestic infrastructure and its overseas operations, positioning the group to benefit from continued infrastructure investment.
“We would rather own the people building the network than guess which technology wins on top of it,” said Yee.
Budget 2027 is the next key test
Rakuten Trade’s 1,770 KLCI target assumes that Budget 2027, to be tabled on 9 October, confirms rather than materially defers planned energy-transition spending.
“If the Budget pushes energy-transition spending into the back half of the plan period, or the grid allocation comes in materially below what has been signaled, we would revisit the number,” said Yee.
The firm also highlighted risks from weaker-than-expected Budget allocations, delays in large infrastructure tenders and project execution, continued foreign fund outflows and volatility in global interest rates.
For investors, Rakuten Trade believes the period ahead of Budget 2027 will be less about chasing the latest market headline and more about identifying sectors where earnings visibility is supported by committed investment programmes.
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