KUALA LUMPUR (Oct 12): A rebound in banking heavyweights lifted the FBM KLCI on Monday following the Budget 2027 announcement, but analysts expect limited upside as the budget focuses largely on easing the cost of living.
Maybank Investment Bank (Maybank IB) said smaller-cap stocks are likely to benefit more than large-cap companies, with opportunities in renewable energy, technology, water infrastructure, and mechanical and electrical engineering.
The firm said the budget offers more opportunities for smaller-cap stocks, while its limited direct impact on large-cap sectors makes a broader market rally less likely.
The FBM KLCI rose 7.87 points or 0.49% to 1,616.32 at the midday break on Monday, supported by gains in banking heavyweights Malayan Banking Bhd (KL:MAYBANK), Public Bank Bhd (KL:PBBANK) and CIMB Group Holdings Bhd (KL:CIMB).
Consumer stocks, however, lagged, with selected counters including 99 Speed Mart Retail Holdings Bhd (KL:99SMART) and Mr DIY Group (M) Bhd (KL:MRDIY) coming under selling pressure.
Nevertheless, analysts see opportunities in selected domestic-oriented sectors as Budget 2027 measures to support household incomes, encourage homeownership and sustain infrastructure investment could underpin demand.
Hong Leong Investment Bank (HLIB) Research said higher cash assistance, expanded tax reliefs and the minimum wage increase could benefit mass-market consumer companies, particularly those participating in the Sumbangan Asas Rahmah (Sara) programme.
Potential beneficiaries include 99 Speed Mart, Mr DIY, Aeon Co (M) Bhd (KL:AEON) and Focus Point Holdings Bhd (KL:FOCUSP).
HLIB also expects national carmakers Proton and Perodua to benefit from improved consumer purchasing power, potentially supporting DRB-Hicom Bhd (KL:DRBHCOM), Sime Darby Bhd (KL:SIME) and MBM Resources Bhd (KL:MBMR).
In the property sector, the extension and expansion of stamp duty relief for first-time homebuyers could support developers targeting this segment, including Matrix Concepts Holdings Bhd (KL:MATRIX) and SkyWorld Development Bhd (KL:SKYWLD).
The anticipated release of the Johor-Singapore Special Economic Zone (JS-SEZ) masterplan by year-end could also benefit property and construction companies with exposure to Johor, such as UEM Sunrise Bhd (KL:UEMS) and Kimlun Corp Bhd (KL:KIMLUN).
Meanwhile, BIMB Securities favours domestic-oriented sectors, including technology, utilities, construction, property and consumer companies, citing continued infrastructure investment and measures to support household incomes.
The research house highlighted RM83 billion in development expenditure and RM15 billion in power grid investments as spending commitments that could sustain demand for infrastructure-related services.
Maybank IB also remained positive on consumer staples, naming Nestle (Malaysia) Bhd (KL:NESTLE) as its preferred pick, alongside selected renewable energy and construction-related companies.
However, analysts cautioned that higher labour costs could offset some benefits from stronger domestic consumption. BIMB Securities estimated that the wage increase could raise total production costs by 2% to 5% for labour-intensive businesses such as plantation and rubber glove producers.
HLIB expects Budget 2027 to have little immediate impact on the benchmark index, given its emphasis on household welfare rather than measures directly supporting listed companies. It maintained its year-end FBM KLCI target of 1,720 points.