PETALING JAYA: Consumer spending is expected to remain resilient into the final quarter of the year, supported by fiscal assistance, stable inflation and a recovery in household sentiment.
Tourism spending and a potential boost from Budget 2027 could provide further support, even as rising input costs remain a key risk for retailers.
Hong Leong Investment Bank (HLIB) Research expects the government’s fiscal support to continue underpinning consumption, with Budget 2027 on Oct 9 likely to include measures aimed at protecting purchasing power and a possible revision to the minimum wage.
The brokerage maintains its “overweight” stance on the consumer sector, with AEON (M) Bhd and Focus Point Holdings Bhd
as its top picks with target prices at RM1.78 and 89 sen respectively.
“Consumer confidence fell to its lowest level in the second quarter of financial year 2026 (2Q26) since 4Q22, but spending did not follow,” HLIB Research noted, highlighting private consumption grew 4.8% year-on-year (y-o-y), while retail trade rose 6.7% on average for the quarter.
“We read the disconnect as a hit to confidence that has changed the mix of spending rather than its level, with eWallet use steady at groceries and convenience stores, while discretionary categories such as food delivery, hotels and flights declined,” it added.
HLIB Research believes sentiment could recover as some earlier pressures are showing signs of easing.
The April Budi95 fuel quota cut was reversed from Sept 1, while headline inflation remained below May’s 2% peak, at 1.8% in July and 1.9% in August.
The subsidised RON95 price remains at RM1.99 a litre, shielding households from much of the impact of higher energy costs.
Fiscal support is also substantial, HLIB Research said.
“The 2026 Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah allocation stands at RM15bil, with assistance of up to RM4,600 per household,” it noted.
HLIB Research estimates that households receiving maximum cash and fuel support could receive about RM8,500 a year, equivalent to around 23% of annual gross pay based on the March 2026 median formal-sector wage.
The research house also expects a minimum wage revision, with the current RM1,700 rate having taken effect in February 2025.
Based on past increases, it expects the rate to rise to RM1,900 to RM2,000 in 2027, with higher incomes potentially supporting value retailers such as 99 Speed Mart Retail Holdings Bhd and MR DIY Group (M) Bhd.
Tourism offers another growth leg. International arrivals were flat at 12.9 million in the first half of financial year 2026 (1H26), but travel receipts rose 23.2% to RM62.2bil.
The return of Formula 1 to Sepang from Oct 2 to Oct 4, coinciding with China’s National Day Golden Week, could provide an additional boost.
“China is Malaysia’s fastest-growing source market, with arrivals up 25.2% y-o-y to 1.41 million in 1Q26, the single largest contributor to tourism growth,” HLIB Research said, identifying Kopi Kenangan Bhd as the “cleanest” beneficiary among its coverage.
In the recently concluded earnings season, seven of nine stocks under coverage met or beat expectations.
HLIB Research expects the sector’s recent weaker performers to rebound into 2H26, noting that misses at MR DIY and Kopi Kenangan were largely due to one-off or timing-related costs.
An analyst said Malaysia’s consumer sector should remain supported by resilient domestic spending, particularly as fiscal assistance continues to cushion households against higher living costs.
“The combination of improving consumer sentiment, tourism activity and potential income support could provide a firmer backdrop for retailers, although rising input costs remain an important factor to watch,” he explained.
Another analyst was more cautious, citing rising cost of living amid global uncertainties.
“Despite continued cash assistance, consumer confidence remains subdued, suggesting discretionary spending,” he pointed out.
