Malaysia’s Budget 2027 is projected to have a modest positive effect on the country’s equity markets, with targeted measures aimed at supporting household spending and corporate profit margins. However, analysts suggest the overall impact is likely to be limited and sector-specific rather than broad-based.
According to a recent report from CIMB Securities, Budget 2027 is expected to provide support to equities but is unlikely to serve as a major catalyst for market-wide gains. CIMB Treasury & Markets Research estimates that the fiscal measures could contribute around 0.1 percentage point to real GDP growth, implying restrained potential for widespread earnings upgrades.
Key beneficiaries are anticipated to include sectors such as construction and infrastructure, consumer retail, utilities, and data centre infrastructure. The report highlights that an increase in direct cash assistance under the Sumbangan Tunai Rahmah/Sumbangan Asas Rahmah program to approximately RM17 billion from RM15 billion, coupled with potential middle-income tax relief and a minimum wage hike to between RM1,800 and RM2,000 monthly, may bolster household disposable income and consumption. This would potentially advantage value retailers like 99 Speed Mart Retail Holdings Bhd, Eco-Shop Marketing Bhd, and MR DIY Group (M) Bhd, along with food and beverage manufacturers including Nestle (Malaysia) Bhd, Life Water Bhd, and QL Resources Bhd.
Another notable aspect is the refinement of the expanded sales and service tax framework, which could have a more direct influence on corporate earnings. The research team estimates possible revenue forfeiture of about RM1 billion due to additional business-to-business and production input exemptions. Broader exemptions may reduce tax cascading through supply chains and ease margin pressures for companies, particularly within construction, manufacturing, logistics, agriculture, and select exporting firms. The ultimate effect will depend on the scope of these exemptions and any additional government mechanisms to alleviate embedded taxes on intermediate inputs.
Construction may also benefit from increased development expenditure targeting water infrastructure, flood mitigation, transport, electrical grid enhancements, and projects in Sabah and Sarawak. Companies such as Gamuda Bhd, IJM Corp Bhd, Malayan Cement Bhd, and Insight Analytics Sdn Bhd are highlighted as well-positioned to capitalize on such spending. However, analysts caution that the impact will hinge on new project awards and execution, since some allocations may fund ongoing projects rather than new contracts.
Potential risks include higher labour costs due to the proposed minimum wage increase, which could affect labour-intensive sectors like plantations, manufacturing, and services. Although an immediate rise in the multi-tier foreign worker levy is considered unlikely, increased operational expenses remain a concern. Furthermore, the introduction of a carbon tax could challenge steel and other heavy carbon-emitting industries. Another element under consideration is a proposed electric vehicle (EV) sales levy intended to finance charging infrastructure, which may increase purchase costs and dampen demand for EVs, though incentives for locally assembled models are expected to continue.
Lastly, the report notes that sustained energy price shocks could raise subsidy expenditures, placing additional strain on fiscal resources. Overall, while Budget 2027 offers targeted support that could favor specific industries, broader market gains may be tempered by ongoing fiscal consolidation and cost pressures.