Most brokers lauded finance minister Anwar Ibrahim’s move to slash spending, reduce debt and employ additional levies, but kept their 2023 targets for the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) unchanged in the face of increased taxes.
The gauge fell as much as 0.5% today, amid broader weakness in the region.
Restoring fiscal health will be critical for Malaysia to preserve its top credit rating in emerging Southeast Asia and maintain investors’ trust at a time when increasing US interest rates have pushed them away from emerging-market assets.
Foreign funds have sold about US$682 million (RM3.23 billion) of local stocks this year and withdrawn US$114.3 million (RM541.5 million) from the nation’s bonds so far this month, according to data compiled by Bloomberg.
Still, analysts have touted the construction and property industries as beneficiaries of the budget given the higher development allocation and new projects planned.
Shares related to these sectors were mostly lower today, while poultry stocks rose after authorities lifted price controls on chicken and eggs.
Citigroup’s analyst Megat Fais says together with the higher service tax, the impact on consumers is more mixed versus last year, despite higher cash handouts, one-off cash incentives to government servants and additional income tax breaks.
Other relative winners include construction, tech, and tobacco/breweries.
“With less noise on the political front, earnings delivery is key going forward,”he said.
UOB Kay Hian’s analyst Vincent Khoo said the budget is “market-neutral,” but signals the unfolding of gradual fiscal reforms.
“While fiscal consolidation points to slower domestic consumption growth, the country’s fiscal discipline supports our view for a stronger ringgit in 2024,” Vincent said.
In addition, Maybank Investment Bank analyst Suhaimi Ilias said the budget sustains fiscal consolidation and aligns allocations with recent policies, benefitting sectors such as construction, electronics, chemicals, electronic vehicles and tourism.
“The firm maintains the end-2023 target for the FBM KLCI at 1,520,” he said.
Meanwhile, Kenanga Investment Bank’s analyst said that the Budget 2024 turns out to be a less bitter pill for most as it raises taxes on one hand, but doesn’t explicitly mention anything on subsidy rationalisation for petroleum, and progressive wages for workers.
The firm maintains the end-2023 target for Malaysia’s equity benchmark at 1,520.
AmBank Research’s analysts noted that the budget supports the 12th Malaysian Plan in securing a more sustainable future with a carefully crafted retargeting mechanism for subsidies which helps to reduce the 2024 fiscal deficit.
Affin Hwang Investment Bank’s analyst Alan Tan expressed that the budget will neither excite nor disappoint as consumers will feel the brunt from some taxes and higher cash assistance will be offered to the needy.
‘The bold move of rationalising fuel subsidy will boost the government’s credibility in carrying out reforms,” Alan said.
The firm maintains a neutral stance on Malaysian equities and keeps the 2023 target for Malaysian equity gauge unchanged at 1,438.