KUALA LUMPUR: UOB Kay Hian sees selective stock opportunities in the 2027 Budget, favouring utilities, renewable energy, consumer, property and technology sectors amid continued fiscal consolidation.
Analyst Desmond Chong said the fifth Madani Budget was broadly market-neutral, with higher government spending and domestic investment expected to support demand, while the government continues to narrow its fiscal deficit.
The overall spending and investment envelope rises 8.5 per cent to RM510 billion in 2027, from RM470 billion in 2026.
This comprises RM459.8 billion in federal expenditure and RM50.2 billion in investments by government-linked investment companies, public-private partnerships, federal statutory bodies and Ministry of Finance Inc. companies.
Federal expenditure comprises RM376.8 billion in operating expenditure and RM83 billion in development expenditure.
The government is targeting a fiscal deficit of 3.3 per cent of gross domestic product in 2027, down from 3.6 per cent in 2026.
Chong said higher allocations for Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah, personal income tax relief and minimum wage increases could provide a marginal boost to household disposable income and spending.
He identified 99 Speedmart Bhd and Eco-Shop Marketing Bhd as potential beneficiaries of stronger spending on essential goods and selected discretionary purchases.
"However, the increase in minimum wage to RM2,000 from June 27 could exert pressure on manufacturers' margins, with a potentially greater impact on labour-intensive retail, plantation and electronics manufacturing services players but a smaller impact on outsourced semiconductor assembly and test and semiconductor production equipment players," he said in a note.
Chong said utilities and renewable energy companies are among the clearer beneficiaries, supported by investments in electricity grid infrastructure and the energy transition.
He said Tenaga Nasional Bhd's RM15 billion grid investment, alongside solar and renewable energy developments, is expected to support project flows for engineering, construction and equipment suppliers.
Potential beneficiaries include Gamuda Bhd, Sunway Construction Group Bhd, Solarvest Holdings Bhd, Pekat Group Bhd and Northern Solar Holdings Bhd.
Chong noted that rail rehabilitation, water infrastructure and public facility upgrades could provide further support for construction activity.
"The reinstatement of the variation of price clause for diesel and bitumen also provides some relief for eligible contractors," he said.
In the property sector, housing guarantees and stamp duty exemptions aimed at improving first-home affordability could benefit Eco World Development Group Bhd, Mah Sing Group Bhd and Matrix Concepts Holdings Bhd.
Chong said the development of the Johor-Singapore Special Economic Zone could also create opportunities in industrial property and logistics.
Meanwhile, semiconductor investments by Khazanah Nasional Bhd and Kumpulan Wang Persaraan (Diperbadankan), together with support for integrated circuit design and advanced packaging, are expected to reinforce Malaysia's ambitions in higher-value technology industries.
Chong said the planned Sovereign AI Cloud and initiatives to encourage enterprise artificial intelligence adoption could generate longer-term opportunities across automation, cloud infrastructure, information and communications technology services and data centre supply chains.
However, the near-term earnings impact will depend on funding deployment, commercial viability and procurement timelines.
Despite the selective opportunities, UOB Kay Hian maintained its end-2026 FBM KLCI target of 1,760 points.
Chong said market sentiment could remain fragile amid rising bond yields, expectations of further interest rate increases, elevated oil prices and geopolitical tensions in the Middle East.
"Against this backdrop, we favour high-quality, large-cap domestic leaders with resilient earnings, robust cash flows and defensive characteristics.
"We also advocate selective exposure to mid-cap growth companies offering strong earnings visibility and identifiable structural catalysts," he added.
Its top picks are 99 Speed Mart Retail Holdings Bhd, CIMB Group Holdings Bhd, Eco World Development Bhd, Gamuda Bhd. Greatech Technology Bhd, Kuala Lumpur Kepong Bhd, MISC Bhd and Solarvest Holdings Bhd.
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