iFAST Capital's Kevin Khaw said the encouraging performance in the domestic bourse is largely being supported by gains in regional markets.
PETALING JAYA: Investors appear to be sanguine in light of continued market strength, in spite of further signs that point towards a US government shutdown in the near term.
Risk appetite continues to hold up and the FBM KLCI sustained its gains, sitting at near its year-to-date high even as observations on the ground indicate a high likelihood of a US government shutdown on the horizon.
The local broader market’s recent resilient performance was in tandem with the movements on the international markets whereby many indices were trading at or near their historical highs.
Any short term tariff tantrums aside, the local market’s outlook is seen to be supported by sensible valuations moving forward, fund managers said.
“Bursa Malaysia appears to be a laggard play and the benchmark FBM KLCI may have further room to climb as valuations support.
“Malaysia’s market is still far from its historical high levels. Another catalyst that could support is the soon to be announced Budget 2026 which is viewed as a catalyst by institutional investors,” Tradeview Capital’s chief executive officer and founder Ng Zhu Hann told StarBiz.
Meanwhile, iFAST Capital Sdn Bhd’s assistant research manager Kevin Khaw said the encouraging performance in the domestic bourse is largely being supported by gains in regional markets.
“We believe this is not merely a short-term spike, as the Malaysian market has been under pressure for the past year despite its solid fundamentals and ongoing structural economic reforms.
“The recent positive performance reflects renewed interest from institutional players and foreign investors,” Khaw said.
Khaw noted US government shutdowns have historically had limited market impacts, though sentiment could weaken if any delays in key economic data clouds the Federal Reserve’s (Fed) interest rate outlook.
“Overall, we expect some volatility in the near term. However, investors should view short-term fluctuations as opportunities, given the country’s positive prospects. The upcoming Budget 2026 may provide a short-term tailwind, while structural reforms and a dovish Fed path remain long-term catalysts,” Khaw said.
Commenting on any impending shutdown of the US government, Ng said this issue is not new and the markets appear to be numbed to this now and they assume it will resolve eventually.
“The impending Asean Summit will see US President Donald J. Trump attending as well as other major world leaders which may potentially lead to further economic or tariff announcements.
“There will always be this possibility of such unanticipated announcements and investors appear to be braced for any such outcomes,” Ng said.
He noted the recent Budi95 targeted petrol subsidy for citizens is a positive for more clarity and could help support consumption spending in the medium term moving forward.
“These have allayed concerns although in the broader markets support is seen to still come from data centre plays and construction spending.
“Although the banks have softened a little on the recent interest rate cut while small and medium enterprises are reported to be facing some cost pressures, it would be interesting to see how the budget can help alleviate some of these concerns,” Ng said.
Meanwhile, UBS Global Research pointed out there have been many US government shutdowns over the years but only a few that have lasted longer than a week.
“By definition, anything shorter than a week would have a negligible impact on the economy and therefore little impact on financial markets.
Of those that have lasted longer than a week, we have seen mixed financial market results both heading into, and during, the shutdown,” UBS Global Research said in a note on Sept 25.
Based on its compiled historical data on previous instances of a US government shutdown, UBS Global Research noted the data showed volatility appears to be minimal on both the US stock markets and the US 10-year Treasury Note Yield with the exception of the the 2018 shutdown.
“The more significant adverse stock market reaction heading into the 2018 shutdown is notable, but it should be viewed in the context of investor worries over the imposition of import tariffs throughout 2018 and concerns over the impact of progressively tighter monetary policy,” it said.
“While it is possible that the equity market reaction to the 2018 shutdown could be repeated, we would note that the initial downtrend in December 2018 was temporary.
“By the time the stalemate was resolved in late January, the S&P 500 index had rebounded,” UBS Global Research added.
