Equity Market Outlook — October
Regional Markets
Global equity markets experienced heightened volatility throughout September 2026, driven by geopolitical escalation in the Middle East, supply disruptions across the Strait of Hormuz, and a sharp rebound in Brent crude oil prices. Elevated energy costs intensified global inflationary pressures and lifted sovereign bond yields, altering US monetary policy expectations toward a higher-for-longer interest rate trajectory. The Dow Jones Industrial Average fell 4.29% month-on-month as rising treasury yields and escalating input costs weighed heavily on industrial, capital goods, and traditional cyclical constituents. The broader S&P 500 Index declined 0.45% month-on-month, reflecting a partial offset where macro headwinds in financial, industrial, and consumer discretionary names were tempered by strength in large-cap technology stocks. Conversely, the tech-heavy Nasdaq Composite rose 1.86% month-on-month, outperforming peer domestic benchmarks due to sustained capital allocations into artificial intelligence infrastructure and semiconductor hardware manufacturers.
The Stoxx Europe 600 dropped 2.49% month-on-month as elevated crude prices and accelerating producer price inflation constrained corporate profit margin expectations across European industrials. In Asia, equity market trajectories were determined by exposure to the global technology supply chain versus domestic economic headwinds. Taiwan’s Taeix gained 3.47% month-on-month, leading regional performance on the back of accelerated foreign fund inflows into semiconductor foundries and AI hardware suppliers. South Korea’s Kospi Index advanced 0.72% month-on-month, supported by resilient technology export orders. In contrast, Greater China markets experienced broad-based contraction. The Hang Seng Index declined 3.73% month-on-month due to persistent weakness in property sector valuations and foreign capital outflows from financial heavyweights. China’s Shanghai Composite Index reduced 3.61% month-on-month as sluggish domestic credit demand and weak retail sales growth offset the People’s Bank of China’s decision to maintain key lending rates at record lows.
Southeast Asian equity markets faced significant selling pressure during September 2026 as foreign institutional investors reduced emerging market exposures amid dollar strength, elevated bond yields, and surging energy import bills. Indonesia’s Jakarta Composite Index was the regional laggard, falling 6.68% month-on-month. The Philippine Stock Exchange Index dropped 4.65% month-on-month amid elevated domestic inflation figures and weakening consumer confidence. Vietnam’s VN-Index retreated 3.47% month-on-month as liquidity conditions tightened and margin trading balances contracted across major brokerages. Singapore’s FTSE Straits Times Index (STI) demonstrated relative resilience, dipping 0.42% month-on-month as gains in energy and utility components helped cushion capital outflows from the financial sector.
Local Markets
The benchmark FBM KLCI dropped 4.33% month-on-month, underperforming its regional peers as foreign institutional selling concentrated on index-heavy banking constituents. Broad market indices mirrored this downside, with the FBM Emas Index declining 3.70% month-on-month and the FBM Shariah (FBMS) Index falling 2.99% month-on-month. The FBM Small Cap Index outperformed the main market benchmark by falling a lesser 1.28% month-on-month, as domestic retail participation provided downside cushion to small-cap equities relative to foreign-dominated blue chips. Malaysian equities reversed previous monthly gains as foreign institutional investors recorded net outflows of RM1.6 billion during September 2026, bringing cumulative nine-month net foreign outflows to RM6.45 billion.
Outperforming sectors were led by the Bursa Malaysia Energy Index, which surged 8.6% month-on-month to top sectoral gains as crude oil prices rallied above USD 100 per barrel, driving earnings re-ratings for upstream players and complex oil refinery. The Bursa Malaysia Construction Index advanced 7.1% month-on-month, supported by data centre contract awards and accelerating public infrastructure project rollouts. The Bursa Malaysia Utilities Index rose 2.9% month-on-month, benefiting from defensive yield characteristics and growing structural power demand tied to data centre expansions. The Bursa Malaysia Property Index underperformed, declining 7.5% month-on-month as rising interest rate expectations and profit-taking dragged down valuation multiples. The Bursa Malaysia Consumer Index fell 6.5% month-on-month amid concerns over escalating input fuel costs, wage inflation, and potential margin compression. The Bursa Malaysia Financial Services Index contracted 5.1% month-on-month, driven primarily by heavy foreign net selling in core banking heavyweights.
