The benchmark FTSE Bursa Malaysia KLCI ended 0.1 per cent lower at 1,667.18 points. The index is down 1.5 per cent this year.
The ringgit rose 0.2 per cent to 4.181 against the dollar to its highest level since Oct 11.
According to the NAR report, the ringgit is on course for its first weekly gain since late September, having risen 0.4 per cent till Thursday.
Prime Minister Najib Razak, who is also finance minister, will present the nation’s 2017 budget on Friday.
There has been speculation the budget will concentrate on support for lower and middle income households.
However, the NAR report said, analysts did not see much room for a significant increase in social spending, as any deviation from the fiscal consolidation path risked a sovereign downgrade and more weakness in the ringgit.
“In line with the current economic development, we are expecting that Budget 2017 will focus on three issues i.e. economic growth, welfare and prudent spending,” MIDF Research said in a note.
“There are a few strategic measures which could be adopted by the government to stimulate domestic economic activity at least in the short term with relatively low impact towards its finance.”
On the KLCI, 14 of the 30 constituents ended lower Thursday and seven closed unchanged, while overall declining issues outnumbered advancing ones 417 to 342.
Foreign investors bought RM76.3 million in Malaysian shares on Wednesday, according to Kenanga Research.
British American Tobacco Malaysia led gains on the KLCI, rising 1.3 per cent to RM48.50.
Mobile operator Axiata and resort-to-rail conglomerate YTL Corp closed 0.8 per cent higher at RM5.14 and 0.6 per cent higher at RM1.77.
Banking major AMMB Holdings and gaming conglomerate Genting declined for the first time in three sessions, slipping 1 per cent to RM4.11 and 1.7 per cent to RM7.95. Malayan Banking slipped 1.3 per cent to RM7.60.