What Is HLIB’s Outlook on the Consumer Sector?
Hong Leong Investment Bank (HLIB) has kept its Overweight call on the consumer sector, pointing to margin recovery from receding commodity prices and resilient domestic consumption patterns.
HLIB also cited tourism recovery and the potential for more rakyat friendly government measures as additional tailwinds for consumer names on Bursa Malaysia.
Why Are Fuel and Freight Costs Easing After the Iran War Shock?
Fuel and freight costs spiked between March and April following the closure of the Strait of Hormuz, but have since eased after a peace memorandum of understanding (MoU) was signed in mid-June.
HLIB said that barring a full-scale re-eruption of the Iran war, receding fuel and freight costs should offer a reprieve for logistics- and packaging cost-sensitive consumer names in the second half of calendar year 2026 (2H CY26).
How Contained Is Malaysia’s Inflation and Labour Market?
Inflation Trends
Despite the Iran war disruption, Malaysia’s Consumer Price Index (CPI) averaged 1.9% YoY in March-May, up from 1.5% in January-February.
HLIB attributed the contained inflation to Malaysia’s fuel subsidy framework, which it said should help put a lid on cost-of-living pressures.
Labour Market Resilience
Malaysia’s unemployment rate held at 2.9% for five straight months from November 2025 to March 2026, an 11-year low, before ticking up marginally to 3.0% in April/May.
Labour force participation stayed steady at 70.9%, with job growth concentrated in wholesale & retail trade, food and beverages (F&B) and services.
HLIB said purchasing power remains supported by a healthy labour market, which should keep discretionary consumer spending buoyant.
Could Budget 2027 Boost Consumer Spending Further?
HLIB noted the possibility of an early GE16, which raises the likelihood of more rakyat friendly measures being rolled out.
The firm said Budget 2027 could include more consumption-boosting measures, such as a potential increase in broad-based cash assistance, which it noted has generally been raised in most years.
- HLIB maintains an Overweight rating on Malaysia’s consumer sector.
- Fuel and freight costs, which spiked after the Strait of Hormuz closure, have eased following the mid-June peace MoU.
- CPI averaged 1.9% YoY in March-May 2026, versus 1.5% in January-February.
- Unemployment held at 2.9% (an 11-year low) from November 2025 to March 2026, before rising to 3.0% in April/May.
- HLIB expects Budget 2027 could bring more consumption-boosting measures, including a possible increase in broad-based cash assistance.
Further Reading
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Research Note: Analysis referenced in this article is based on research published by HLIB. This blog summarises publicly available information for educational purposes only.
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