PETALING JAYA: A possible snap 16th General Election (GE16) may dominate political chatter, but analysts say the direction of Bursa Malaysia will depend more on corporate earnings, economic reforms and foreign fund flows than the election itself.
iFast Capital assistant manager of research Kevin Khaw Khai Sheng said the firm “would not bet on a meaningful GE-driven rally, but nor are we writing the pattern off entirely”.
“We see any GE impact as a short-term sentiment trigger, rather than a sustained driver,” he told StarBiz.
“Crucially, the market has largely priced in a more fragmented political landscape.”
Khaw said the institutional backdrop remains resilient, adding that whichever coalition prevails would still need economic growth to fund its policy agenda, reducing the likelihood of severe market disruption from the election outcome.
He said the more durable drivers of the market remained structural factors, including the Government-linked Enterprises Activation and Reform programme, a fifth consecutive year of earnings growth and record-low foreign shareholding levels that leave room for foreign inflows to return.
Khaw said the key risk from the polls would be any disruption to the Madani government’s reform agenda.
“Our key risk is a discontinuation of the Ekonomi Madani framework and, more importantly, the fiscal-reform trajectory beneath it (subsidy rationalisation, sales and services tax, the deficit path), though we regard this as a low-probability tail in our base case,” he added.
UOB Kay Hian (UOBKH) Research said the Constitution requires GE16 to be held by February 2028, although industry expectations have placed the possible timing anywhere between the fourth quarter of financial year 2026 (4Q26) and early 2028.
The research house maintained its base case that GE16 will be held in the first half of 2027, while acknowledging rising expectations that the election could be called as early as 4Q26.
UOBKH Research said its base case assumes a hung parliament outcome, similar to GE15, where the current coalition would still emerge as the ruling government, albeit with a smaller majority.
“In all likelihood, GE16 would face a hung parliament and the subcoalitions within the Madani government would ‘horse trade’ to re-enact a ruling coalition,” the research house said.
It said such a scenario would likely result in policy continuity, but added that markets are expected to turn more cautious ahead of the election period.
“We expect the Malaysian equity market to turn risk-off by 4Q26 in view of the possibilities of GE16 being held by 4Q26 and a hung parliament scenario (hence, initial uncertainty to the formation of a ruling coalition),” it said.
The FBM KLCI closed at 1,683.07 points last Friday before the long weekend.
While the benchmark index has been largely flat year-to-date, having started the year at around the 1,670-point level, it remains nearly 12% higher than a year ago when it traded at about 1,500 points.
Khaw said the benchmark index could reach the 1,800-point level by year-end, although this would be at the optimistic end of his base-case scenario.
He said such a move is “well within reach in a supportive tape”, but it would require several conditions to align, including stronger corporate earnings, a resumption of foreign fund inflows and a benign external environment.
“On balance, we view 1,800 as a credible year-end outcome with a tailwind.”
Historically, market performance around GEs has been mixed.
Following Barisan Nasional’s GE13 victory in 2013, the FBM KLCI climbed to a then-record high of about 1,826 points on the first trading day after polling.
The benchmark index later extended its gains to about 1,893 points in 2014.
In contrast, the FBM KLCI fell sharply following the historic change in government in GE14, declining from around 1,783 points at the start of 2018 to a low of about 1,664 points roughly two months after polling day.
During GE15 in 2022, the market was volatile amid uncertainty over the formation of a government.
After Datuk Seri Anwar Ibrahim was appointed Prime Minister on Nov 24, 2022, the FBM KLCI surged 4.04% in a single day.
Separately, MBSB Research said a longer-term review of past GEs suggests that election timing alone does not reliably determine market direction.
The research house kept its end-2026 target for the FBM KLCI at 1,800 points, alongside targets of 13,100 for the FBM Emas Syariah and 18,900 for the FBM 70.
Meanwhile, UOBKH Research maintained its end-2026 FBM KLCI target at 1,760 points.
