The FTSE Bursa Malaysia KLCI rose 0.5% week-on-week to 1,736 points last week, as buying by local institutions helped offset continued foreign selling, according to CIMB Securities.
The brokerage said Bursa Malaysia and FTSE Russell had confirmed that the FBM KLCI will be expanded to 50 constituents from the current 30, increasing the index’s coverage of Main Market capitalisation to around 70%, from 60%.
The proposed 10% company-level cap will also not be implemented.
The 20 new constituents will enter the index at 50% of their final index weights on 21 December 2026, before rising to 100% on 21 June 2027. CIMB Securities said the two-stage implementation should effectively spread passive fund inflows across two tranches.
The brokerage viewed the index expansion positively, saying it would broaden sector representation and reduce the KLCI’s concentration in financial services and utilities.
Potential new constituents are also expected to benefit from index-related buying, greater institutional visibility and improved liquidity.
Meanwhile, corporate earnings released during the week were mixed. Of the 31 companies that reported results, four outperformed CIMB Securities’ expectations, while eight fell short of forecasts.
On the macro front, Malaysia’s trade surplus widened to RM22.5 billion in July 2026, as exports surged 38% year-on-year, led by a 51% increase in electrical and electronics (E&E) exports. Imports also remained strong, rising 36.4%.
However, CIMB Securities noted that the stronger export performance was partly driven by a surge in re-exports, while mining exports weakened sharply and the oil and gas trade balance swung into deficit.
The brokerage therefore viewed the trade data as largely neutral and said it was looking to the July 2026 Industrial Production Index (IPI) for a clearer indication of underlying third-quarter growth momentum.
On the policy front, Prime Minister Datuk Seri Anwar Ibrahim said on August 20 that he would make three important announcements — on the eve of National Day on August 30, during Malaysia Day celebrations on September 16 and in early October during the tabling of Budget 2027.
No details of the announcements were provided.
The Ministry of Finance’s Budget 2027 Pre-Budget Statement, released on August 18, outlined 10 focus areas ahead of the budget’s tabling in Parliament on October 9.
CIMB Securities said Budget 2027 would seek to balance household support against measures aimed at boosting productivity, investment and higher-value economic growth amid higher energy prices and cost-of-living pressures.
Key priorities include social protection, education and healthcare, governance reforms, decent wages and high-value investments. Strategic sectors such as semiconductors, artificial intelligence, digitalisation and energy transition are also expected to remain in focus.
The government is expected to continue fiscal consolidation and targeted subsidies, while strengthening energy, food, climate and cybersecurity measures.
External risks remained a concern as Iran continued to restrict unauthorised tanker traffic through the Strait of Hormuz, while negotiations between Iran and the United States remained stalled and Washington prepared tougher sanctions against Tehran.
Commercial traffic through the strategic waterway remained well below normal levels despite greater use of alternative routes, sustaining uncertainty over global energy flows and oil prices.
At the sector level, transportation, plantation and healthcare were the top-performing sectors during the week, while technology, consumer and property stocks underperformed.
Average daily trading value increased 5.7% week-on-week to RM3.7 billion, from RM3.5 billion previously.
Overall, CIMB Securities said the broader market continued to benefit from domestic institutional support despite persistent foreign selling, while the planned expansion of the KLCI is expected to provide a broader representation of the Malaysian equity market and potentially improve liquidity and institutional participation.
