The FBM KLCI defied regional weakness last week, rising 10.6 points to close at 1,609.1 (+10.9 points week-on-week), buoyed by gains in heavyweights Maybank, Public Bank, IHH Healthcare, Petronas Chemicals, Tenaga Nasional, and Sunway. Optimism ahead of Budget 2026, expected to be rakyat-friendly yet fiscally responsible, underpinned investor sentiment.

This came as most Asian markets ended lower on Friday, pressured by jitters over U.S. tariffs and profit-taking in technology counters. Pharmaceutical stocks led losses after former U.S. President Donald Trump proposed sweeping new tariffs — 100% on pharmaceutical imports, 25% on heavy trucks, and up to 50% on furniture. Concerns also mounted over tech valuations following Nvidia’s £2 billion investment in the UK AI startup ecosystem and USD100 billion in OpenAI.

In the U.S., the Dow Jones Industrial Average snapped a three-day losing streak, rising 300 points to 46,247, supported by in-line core PCE data and renewed optimism over potential Federal Reserve rate cuts. However, sentiment remained cautious amid Trump’s tariff proposals and the risk of a U.S. government shutdown if Congress fails to strike a deal by 30 September.

On Bursa Malaysia, foreign investors ended a two-week buying streak, recording net outflows of RM452 million for the week, including RM42 million on Friday. Local retailers also posted outflows of RM243 million. In contrast, local institutions absorbed the selling, emerging as dominant buyers with RM695 million in inflows.

Outlook: Constructive Ahead of Budget 2026

HLIB Research maintained a constructive outlook for the KLCI, citing optimism ahead of the 10 October tabling of Budget 2026, alongside supportive external and domestic factors. Among the key tailwinds:

Fed Pivot & Global Liquidity — Softer U.S. growth and labour data are fuelling expectations of a rate cut cycle starting in 4Q25, which could boost global risk appetite.

Policy Clarity & Economic Transformation — Malaysia’s macro fundamentals remain intact, underpinned by strong consumption and robust investment, with national blueprints like the 13MP, NIMP 2030, NSS, and NETR driving long-term growth.

ASEAN Chairmanship — Malaysia’s role as ASEAN Chair in 2025 enhances its geopolitical leverage, potentially unlocking greater trade and investment opportunities.

Resilient Local Flows & Valuation Appeal — Despite year-to-date foreign outflows of RM16.4 billion, the KLCI is supported by RM14.95 billion local institutional inflows and undemanding valuations at 14x CY26 P/E with a 4.2% dividend yield.

From a technical standpoint, the KLCI uptrend remains intact so long as key supports at 1,590 (20-day MA) and 1,571 (61.8% FR) hold. A bullish breakout from its ascending triangle pattern positions the index to retest resistance levels at 1,612, 1,625, and 1,640 in 4Q25.

Related