Malaysia equity strategy: Election season and a hawkish Fed

Research evidence excerpt

Malaysia equity strategy: Election season and a hawkish Fed

Global Markets Research

3 July 2026Malaysia equity strategy

EQUITY: EQUITY STRATEGY

Election season and a hawkish Fed Research Analysts

Malaysia Strategy

Flows and fundamentals: Jun-26 Tushartushar.mohata@nomura.comMohata, CFA - NSM

+60(3)20276895

2H26F – election season and a hawkish Fed: With upcoming state elections in Johor (11 July)

Research Associatesand Negeri Sembilan (1 August), investors are increasingly focused on the possibility of an earlier

GE16 and a more hawkish Fed, though our economics team believes GE16 is more likely in 2027F Malaysia Strategy

than 2026F. We view GE15 in 2022 as the most relevant historical reference point rather than the Alpa Aggarwal, CFA - NSFSPL

earlier one-sided elections, given the new era of coalition politics and hung parliaments that now

characterizes Malaysia's political landscape. Current market conditions have notable similarities to

the pre-GE15 period, with the KLCI trading at comparable valuations (14.2x forward P/E versus

14.0x in June 2022) and a similarly challenging external rate environment as the Fed maintains its

hawkish bias. During GE15, risk appetite weakened meaningfully in the six months leading to the

polling day, with the KLCI declining 6%, subdued trading volumes, and negative foreign flows that

only reversed in 2H23 after the election cycle concluded. While we acknowledge that similar risk-off

sentiment could emerge if investors assign higher probability to an earlier GE16, we believe any

weakness is likely to be less drastic and more transitory than in 2022, given Malaysia's significantly

stronger macro fundamentals today. The GE15 experience showed that market weakness