Hong Leong Investment Bank (HLIB) has turned bearish on the FBM KLCI after the benchmark decisively broke below a key support zone and its long-term uptrend, warning that persistent foreign selling, elevated global bond yields and geopolitical risks could keep Malaysian equities under pressure ahead of Budget 2027.
The KLCI ended Friday marginally higher by 0.5 point at 1,630.9, surrendering most of an earlier 10.4-point bargain-hunting rebound as external and domestic headwinds limited buying interest.
Market breadth improved to 1.00 from 0.46 previously, while trading volume increased to 4.26 billion shares, above the five-day average of 3.48 billion shares. Trading value stood at RM2.71 billion.
Foreign institutions remained net sellers for an eighth consecutive session, disposing of RM69 million worth of Malaysian equities. This brought five-day net selling to RM799 million and year-to-date foreign outflows to RM6.66 billion.
Local institutions provided support with net purchases of RM86 million, taking their year-to-date net buying to RM5.41 billion.
From a technical perspective, HLIB said the KLCI has decisively breached the 1,655-1,667 support zone as well as its long-term uptrend line, confirming what the research house described as a “Triple Top” breakdown.
The index is now trading below all key moving averages while the Moving Average Convergence Divergence indicator remains firmly negative.
Its Relative Strength Index stood at 27.6, suggesting oversold conditions that could trigger a technical rebound. However, HLIB cautioned that there is still no clear reversal signal.
Immediate resistance is now seen at 1,667-1,682, followed by the 1,705-1,720 moving-average cluster.
Failure to regain 1,667 could expose the benchmark to further downside towards 1,624, followed by 1,598 and potentially the Triple Top objective of 1,578, according to HLIB.
HLIB expects risk-off conditions to remain a feature ahead of Budget 2027 on Oct 9, against a backdrop of elevated oil prices, high global bond yields and continued foreign fund outflows. The Finance Ministry has confirmed that Budget 2027 will be tabled in Parliament on Friday.
The research house expects Malaysia’s GDP growth to moderate to 4.7% in 2027 from 5.3% in 2026, while household affordability pressures and possible corporate earnings disappointments could also weigh on sentiment.
It additionally highlighted the planned expansion of the KLCI from 30 to 50 constituents in two phases, beginning in December 2026 and followed by another phase in June 2027, as a market development investors will have to digest.
Globally, Asian markets were mixed on Friday amid caution ahead of US employment data, with high Treasury yields and oil prices restraining risk appetite.
Wall Street nevertheless rebounded for a second session after weaker-than-expected September employment growth sharply reduced expectations for an October Federal Reserve rate increase.
The Dow Jones Industrial Average gained 0.49%, the S&P 500 rose 0.73% and the Nasdaq advanced 1.19%.
HLIB said global markets remain caught between expectations of resilient economic growth and concerns over higher-for-longer borrowing costs, elevated oil prices and heavy AI-related capital expenditure.
Against this backdrop, the research house expects the KLCI to remain vulnerable to risk-off consolidation, with any near-term oversold rebound needing to reclaim key resistance levels before the broader technical outlook improves.
