Most analysts think, according to a report in The Edge, the measures will only give a temporary boost. The report said research houses were, therefore, maintaining their neutral call on the consumer products sector.
Among the measures to improve consumer spending proposed by Finance Minister Najib Razak in Budget 2018 were reducing income tax rates by two percentage points for certain tax brackets and a special allowance of RM1,500 for civil servants next year.
“The income tax cut, which increases disposable income by a maximum of RM1,000, will only have a small impact on those within those tax brackets. If you divide that RM1,000 over one year, it is less than RM100 per month,” The Edge quoted Areca Capital CEO Danny Wong as saying.
The special allowance for civil servants, Wong said, would probably help ease day-to-day expenditure but would not help improve consumer sentiment.
The report said that, year to date, the KLCI Consumer Product Index had gained 8.35% to 624.89 points, a little better than the benchmark index, which gained 6.23% to 1,743.93 points over the same period.
For the third quater of 2017, the Malaysian Institute of Economic Research’s Consumer Sentiment Survey saw the index declining slightly to 77.1 points from 80.7 points in the previous quarter.
MIDF Research analyst Nabil Zainoodin was quoted as saying the Budget 2018 proposals, particularly BR1M and the personal income tax cuts, would have an immediate impact in stimulating consumer spending for the M40 and B40 category.
This will mostly benefit food and beverage companies (F&B), and that too only for the short term. “The ever increasing input costs will put pressure on F&B players to further increase prices,” he added,
The Edge said Maybank Investment Bank Research was more positive on the measures, although it also maintained its neutral stance on the sector.
“We are positive on these measures that essentially will help provide support to consumer demand into 2018 and alleviate some of the cost pressure on households. Companies we think will benefit from these measures would be those that offer mass market consumer goods like Nestle, Bison Consolidated Bhd, 7-Eleven Malaysia Holdings Bhd, Aeon Co (M) Bhd and even Padini Holdings Bhd, Oldtown Bhd and Berjaya Food Bhd,” it said in a report.
Areca Capital’s Wong said if the ringgit fared better against the US dollar, it would also help the consumer sector.