Market steady despite election outcome

PETALING JAYA: Bursa Malaysia has largely shrugged off the latest Negri Sembilan state election, even as the Barisan Nasional and Perikatan Nasional (BN-PN) alliance stormed to a commanding victory.

The BN-PN pact secured a two-thirds majority, cementing its control of the state.

Yet, the landslide failed to spark any meaningful reaction on the stock market.

The FBM KLCI closed marginally up 0.05% to 1,725.7 points.

CIMB Research said the outcome had been largely priced in, as investors had widely expected the BN-PN alliance to secure a governing majority.

“We expect limited immediate market impact, as we do not expect any material change to Negri Sembilan’s development agenda.

“Malaysia Vision Valley 2.0 should remain the state’s flagship growth corridor, alongside major projects such as the Seremban Sentral township, the Springhill hyperscale data centre (DC) campus, and the proposed Midport Smart AI Container Port,” it said in a note.

Tradeview Capital chief investment officer Nixon Wong said the election result, despite its political significance, was unlikely to determine Bursa Malaysia’s medium-term direction on its own.

“The market’s direction will depend more heavily on policy certainties (inducing foreign inflows) and earnings delivery pushing genuine earnings upgrades (Bursa re-rating),” he added.

BIMB Securities director of research Mohd Redza Abdul Rahman said the recent election results should be broadly supportive for Malaysian equities, if they reinforce policy stability and reduce uncertainty.

“Elections are unlikely to be the main market driver in the near term. Investors are likely to focus more on corporate earnings, gross domestic product (GDP) growth, export momentum and interest-rate expectations.

“The macro backdrop remains favourable, supported by strong exports in the first half of 2026 (1H26), a weaker ringgit that benefits exporters, and expectations of resilient economic growth in 2H26.”

Looking ahead, Mohd Redza believes investor focus will gradually shift towards the upcoming Melaka and Sarawak state elections, and eventually, the 16th general election or GE16.

However, unless election outcomes materially alter the policy landscape, he expects fundamentals to remain the dominant driver of equity performance.

“Strong export momentum, healthy investment inflows, the DC and renewable energy (RE) build-out, and expectations of sustained GDP growth in 2H26 are likely to outweigh near-term political concerns.

“As such, elections may influence sentiment at the margins, but earnings delivery and economic growth should remain the key determinants of market direction,” he added.

Meanwhile, CIMB Research said markets will also closely monitor the DAP Special Congress on Aug 16 to see whether the party retains its Cabinet role in the Unity Government.

“More broadly, following BN’s victories in Johor and Negri Sembilan, attention is likely to shift to the timing of GE16 and whether closer BN-PN cooperation at the state level would lead to broader national political alignment,” it said.

Politics aside, Mohd Redza said the second-quarter earnings season is likely to show a “modest positive bias” as more results are announced. This will be led by technology, exporters, industrials, utilities, telecommunications and selected financial and plantation names, according to him.

“Combined with expectations of stronger economic growth in 2H26 and easing geopolitical risks should US-Iran negotiations progress positively, earnings momentum is likely to remain supportive for the rest of the year,” he said.

Mohd Redza noted that technology and export-oriented manufacturers remained key beneficiaries of strong export growth, a weaker ringgit and resilient domestic economic activity.

The weaker ringgit enhances export competitiveness and earnings translation, particularly for semiconductor, electrical and electronics, industrial component and precision engineering companies.

Demand linked to artificial intelligence (AI), DC and digital infrastructure also continues to provide a supportive backdrop.

“We are also positive on industrials, logistics and ports, which benefit from stronger trade flows and supply chain activity.

“Financials should continue to deliver stable earnings, supported by healthy credit growth, asset quality and stronger capital market activity. Bursa Malaysia’s recent results suggest trading and fundraising activities remain robust.”

On the domestic front, Mohd Redza said utilities, telecommunications and water- related companies stand out as structural growth beneficiaries.

Rising investments in RE, grid infrastructure and DC are driving demand for electricity, fibre connectivity and water infrastructure.

These sectors offer relatively defensive earnings profiles while benefiting from Malaysia’s digitalisation and investment-led growth story.

On the other hand, sectors facing higher operating costs may see more mixed results, Mohd Redza pointed out.

“Consumer-related and selected manufacturing companies with limited pricing power could face margin pressure from higher fuel, logistics and imported input costs, partly arising from geopolitical tensions in the Middle East.

“The plantation sector presents a more balanced outlook. While crude palm oil prices remain supportive, production growth has been relatively modest, which could moderate earnings momentum.”

Meanwhile, Wong of Tradeview said it is still premature to conclude 2Q26 corporate results. He noted initial evidence points to a reasonably supportive macro backdrop, but uneven corporate performance.

While Malaysia’s positive economic performance should support corporate earnings, Wong said everything depends on respective financial executions on margins and costs.

“Technology appears better after a mixed start to the year. Street expectations point to stronger sequential revenue for selected outsourced semiconductor assembly and test (Osat) and vision inspection companies, supported by improving orders and semiconductor capital expenditure.

“On the commodity front, Press Metal Aluminium Holdings Bhd is expected to report strong 2Q26 earnings, supported by favourable aluminium prices and alumina cost trends.

“PETRONAS Chemicals Group Bhd may also see a temporary improvement from stronger product pricing and fertiliser demand, though it may still be commodity price dependent and nothing structural.”

Commenting on banks, Wong said they are “less exciting” with narrowing margins.

Utilities and power infrastructure are supported by electricity demand growth, grid investment and DC growth.

“The consumer sector could be a little mixed due to the exposure to raw material price fluctuations, which depend very much on the respective ability to pass on rising costs.

“Construction order books remain strong, particularly around infrastructure and DCs.”

Overall, Wong believes the earnings outlook is “generally constructive but increasingly selective”.

Improving technology and manufacturing activity, infrastructure, DC and foreign direct investment execution remain positive drivers.

On the flip side, geopolitical uncertainties and political risk pose a downside to the domestic stock market.