With this being Prime Minister Ismail Sabri Yaakob’s last budget before going to the polls, investors including BNP Paribas Asset Management and Areca Capital expect to see a populist plan that could involve cash handouts, which should benefit consumer staples companies.
Foreign funds have cut their holdings in Malaysia’s RM1.5 trillion stock market for 14 straight days up to Oct 3, the longest streak since December 2021, according to Bloomberg data. That has brought the main KLCI index to the brink of a bear market before the presentation of next year’s spending plan on Friday.
Zhikai Chen, head of Asian and global emerging-market equities at BNP Paribas Asset Management said the market consensus view on Budget 2023 was that it would focus on targeted subsidies, tax cuts for the B40 and likely silent on the goods and services tax implementation.
Bringing forward the tabling of the budget “has also brought consensus expectations of a general election being called earlier rather than later,” he added.
“We think that the contours of Budget 2023 will tell us more of how the incumbent government is reading the sentiment on the ground,” he said.
Danny Wong, CEO of Areca Capital, expects the budget to focus on job creation, recovery from Covid-19 and at increasing the income of households.
“Investors should expect more measures and assistance to help the lower income group to counter the adverse impact of inflation,” he added.
Ivy Ng, head of research at CGS-CIMB Securities, said there was high anticipation that the government would dish out more goodies than usual to create a “feel good” effect as it would be its last budget before the 15th general election.
History also suggests that the odds for big gains immediately after the presentation of the budget are light. Over the past 13 years, the probability of the KLCI delivering a positive return one week after the budget has been about 46%.
The construction sector may benefit from a potentially higher development expenditure even though no new mega projects beyond those approved in the past six to 12 months are expected.
The consumer sector may gain from cash aid to low-income households and from measures to lift tourism activities.