From bringing businesses back to life and rebuilding livelihoods to a push for sustainability, analysts have named a broad spectrum of sectors that they say the government should see as priority areas.
While some say the focus should be on traditional sectors such as banking, manufacturing and retail, others point out that meeting sustainability goals are equally, if not more, important.
Investors in the local markets, especially the foreign funds, put a lot of emphasis on sustainability issues.
Areca Capital CEO Danny Wong pointed out that sectors such as banking and consumer products will still be important, but there is also a need now to increase the focus on sustainability.
“That means the green industry, renewables, waste management and food technology must also get the needed attention,” he told FMT Business.
Prime Minister Anwar Ibrahim, who is also the finance minister, will table the second iteration of Budget 2023 tomorrow.
Wong said that while political uncertainty has eased given that the general election is over, Malaysia, like its neighbours, is not out of the woods yet.
He believes that while banking and consumer products as well as manufacturing and exports are likely to be the main beneficiaries of the budget, the government should also not ignore the need to pursue environmental, social and governance (ESG) goals.
“With climate change depleting billions of dollars from the economy, investment in ESG has become a megatrend.
“That would mean that renewables, waste management and food technology must get the necessary attention, too,” he said.
Wong said investors have also become more alert to the need to reduce greenhouse gas (GHG) emissions. “The push to impose conditions to ensure adherence to carbon emission requirements is gaining momentum, pushing funds to focus on activities to meet the necessary targets,” he said.
He said this could also encourage investment in new sectors such as IT, electric vehicles (EV) and artificial intelligence (AI) while pushing digitalisation and automation.
“That means applications such as financial technology (fintech) and food technology (foodtech) stand to benefit,” he said.
While he is careful not to second guess the government, NewParadigm Capital Markets founding partner Charanjeev Singh picks logistics and manufacturing as the sectors that he believes, will benefit from Budget 2023.
“With the movement of goods and services picking up, air logistics will be exciting. Since existing infrastructure and equipment are already outdated, upgrades and expansion will be necessary to cope with new demand,” he told FMT Business.
He said investors are also rethinking their investments in China with a view to restructuring their operations in Southeast Asia.
“While Vietnam and Indonesia have the cost-competitive advantage, Malaysia can leverage on its well-educated workforce and adequate infrastructure,” he said.
Charanjeev stressed that as long as Malaysia can demonstrate continuity of policies and incentives, it should drive positive sentiment in the market.
Chartered Financial Analyst Society of Malaysia (CFA) president Chong Jin Yoong sees consumer discretionary purchases and staples as well as construction and non-banking financial institutions as likely beneficiaries of the new budget.
Given that cost of living has been a recurring theme, he expects the government to extend more fiscal support in the form of cash handouts and other forms of assistance.
“Therefore, the consumer products sector, whose items are targeted at the lower and middle income households, will benefit,” he told FMT Business.
On the other hand, he said, growth will be subject to a revision in the allocation for the development expenditure given its impact on infrastructure projects.
However, he expects an increase in development expenditure for Sabah and Sarawak.
Chong said an increase in disposable income, particularly in the lower-middle income households, could also benefit the non-banking financial institutions.
However, he said, the government is more likely to maintain a mildly expansionary policy with a focus on providing support to targeted groups.
“Given how late the budget is being tabled, we are unlikely to see new or significant measures given the six to eight-month lead time needed for implementation. By then it would nearly be time to table Budget 2024,” he said.
Chong also expects growth to be less robust than it was in 2022.
He does not expect the new budget to be a major driver of market sentiment given that political uncertainties associated with the coming state elections, global economic risks such as inflation, changes in central bank monetary policies across the globe and an evolving geopolitical environment will continue to determine investor sentiment on Bursa Malaysia.
“The government will have a tough balancing act. It will need to spend to address cost of living issues and to show progress in time for upcoming state elections, while improving fiscal discipline is something the government is committed to,” he said.
“We do not expect any major revisions to Budget 2023.”