PETALING JAYA: Bursa Malaysia sunk below the 1,600 psychological level briefly, before finding support above this key level, even as investors continued to remain cautious amid external uncertainties and the unveiling of Budget 2027 today.
Industry observers said investors were apprehensive to buy stocks on the local mart, with that same sentiment being shared all across the region.
Locally, the uncertainties surrounding what would be tabled at Budget 2027 added to investor jitters.
Analysts warned that as the tabling coincides with a period of heightened domestic political activity, investors will likely scrutinise the quality of their spending more closely.
Any perceived slippage towards populist spending at the expense of consolidation would likely be punished in the bond market first, with equities following, they said.
Fortress Capital Asset Management Sdn Bhd chief executive officer Datuk Thomas Yong, nevertheless, said Budget 2027 can be a meaningful catalyst for selected domestic sectors.
“But we would be cautious about expecting it, on its own, to reverse the broader market’s trajectory,” he told StarBiz.
The fund manager reckoned the current weakness in Bursa has largely reflected external risk factors and portfolio flows, rather than a significant deterioration in Malaysia’s domestic fundamentals.
“Against this external backdrop, the budget’s most direct contribution to market confidence will lie in fiscal credibility,” Yong said.
He said part of the recent rise in Malaysian Government Securities (MGS) yields reflected a higher term premium as investors priced in bond supply ahead of the tabling.
“A budget that keeps the deficit on a credible glide path towards 3% of gross domestic product, supported by a sensible funding plan, could help compress that premium while continuing to support growth and household purchasing power,” he added.
The stock market benchmark index FBM KLCI finished yesterday at 1,601.01, down 0.67%.
Year-to-date, it is down around 4%.
Elaborating on the upcoming budget, Yong said from an equity-market perspective, investors will be looking for measures that can translate relatively directly into corporate earnings.
These could include development and infrastructure spending, energy-transition and grid investments, measures to support domestic consumption, as well as incentives for higher-value manufacturing, semiconductors and digitalisation, Yong pointed out.
“Construction, utilities and renewable energy-related companies, selected consumer names and parts of the industrial and technology supply chain could therefore see renewed interest if the measures are sufficiently substantive and accompanied by clear implementation timelines.
“Conversely, we would watch for measures that raise labour costs or further broaden the sales and service tax (SST) base, as these could weigh on corporate margins.”
Malacca Securities head of research Loui Low said there was currently a disconnect between improving fundamentals and the weak market sentiment.
He noted that while local earnings and economic growth have shown improvement, geopolitical risks and higher yields were not helping valuations.
“If these macro risks ease, stronger earnings could eventually translate into better market performance.”
In a report, Apex Research said the key message for investors is that Budget 2027 is unlikely to change the market’s direction by itself. “Instead, it should reinforce several investment themes already in place.
“We expect the earnings impact to be concentrated in infrastructure, energy transition, technology and selected domestic-demand beneficiaries,” it told clients.
Apex Research said Budget 2027 should be “mildly positive” for the FBM KLCI, but added that it did not expect a broad-based re-rating.
“Fiscal consolidation remains the policy anchor, while the expected increase in development expenditure is modest,” the research house said, adding that the earnings impact should therefore be concentrated in selected sectors.
The research firm is maintaining its end-2026 FBM KLCI target of 1,770.
Like many, Apex Research is expecting Budget 2027 to potentially signal or announce an incremental increase in the current minimum wage, with RM1,800 to RM2,000 a reasonable range to watch.
It noted for consumers, higher wages should support purchasing power; for labour-intensive sectors such as construction, plantation and parts of consumer, the impact is a direct cost headwind.
Other factors that could “move” the market on Budget Day, it said, included a development expenditure that is materially above RM82.4bil – a positive for construction and infrastructure-linked names – as well as broad new taxes or aggressive subsidy rationalisation, which would be a negative surprise for domestic demand and corporate margins.
Measures that reduce the cascading burden under the SST or improve business compliance efficiency could be mildly positive for corporate sentiment, it added.
The research house said entering into the fourth quarter of 2026, it expects volatility to remain elevated, with markets facing a challenging external backdrop of higher oil prices, persistent Middle East geopolitical risks and a higher-for-longer interest-rate environment.
Domestically, political uncertainty ahead of the 16th general election and the potential KLCI expansion could add to near-term positioning and index-related overhang, it noted.
Apex Research said against this backdrop, it was maintaining a barbell strategy, balancing structural-growth themes such as artificial intelligence, semiconductors, data centres and energy infrastructure with earnings-resilient companies that can withstand macro volatility and benefit from targeted domestic support.
“We believe stock selection will remain key, rather than taking broad exposure to budget beneficiaries. Construction, and energy and utilities offer the clearest policy read-through,” it said, adding that technology remained its preferred structural- growth theme, while property and consumer offered selective opportunities.
In a report, UOB Global Economics and Markets Research said foreign investors turned net sellers of both Malaysian equities and debt securities in September, resulting in total portfolio outflows of RM3.4bil.
