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Market Highlights
Economic Update
Sat, 19 Oct 2024 02:16 pm
Market Outlook: Budget 2025 - Fostering Growth and Promoting Equality

Summary

With expected total revenue next year at RM340.0bn, Budget 2025 aims to narrow the country’s fiscal deficit from estimated 4.3% in 2024 to 3.8% of gross domestic product (GDP) in 2025 in bid to achieve the government’s long term fiscal consolidation target.

Given that the re-introduction of GST was put off the table, the (i) broadening of tax base under SST regime to include non-essential goods, (ii) proposed 2% dividend tax on dividend income of RM100,000 and above, (iii) implementation of GMT in 2025, (iv) carbon tax on iron, steel and energy industries by 2026, (v) hike in sugar-sweetened beverages tax by 40 sen/litre, (iv) full implementation of e-invoicing by 1 Jul 2025 along with the removal of blanket subsidies for RON95 in mid-2025 will be supportive towards fiscal consolidation target.

Once again, the education sector occupies a lion share at RM82.1bn, representing 19.5% of the total Budget allocation highlights the Government commitment towards improving education access and quality, particularly for disadvantaged communities, while the healthcare sector was allocated RM45.3bn, representing 10.8% over the total budget allocation underscores the government focus towards delivery of greater healthcare services.

Despite allocation towards development expenditure allocation remain unchanged at RM86.0bn vis-à-vis revised Budget 2024, the construction sector will be kept busy by several on-going key mega infrastructure projects alongside with the influx of DC-related projects in recent times.

Overall, we opine that Budget 2025 as largely Neutral as it moves to mitigate some of the high cost of living through greater cash aids and broadening individual tax reliefs that will invariably translate to stronger domestic spending, going forward.

We are in view that Budget 2025 beneficiaries include consumer, tourism-related, healthcare, gloves, property and technology sectors (see more below).

We maintain our 2024F and 2025F year-end target for FBM KLCI at 1,680 and 1,750 respectively, based on assigned 15.5x PERs.

Economic Update
Mon, 19 Aug 2024 08:27 am
2Q24 Malaysia Gross Domestic Product - Robust Economic Growth

Summary

Malaysia’s GDP growth accelerated to +5.9% yoy in 2Q24 (1Q24 at +4.2 yoy), and came above advanced estimate of +5.8% yoy. For 1H24, the economy expanded +5.1% (1H23 at +4.1% yoy), which largely on track to meet the Government projection of +4.0%-5.0% for 2024 and surpassed our initial forecast of +4.1% yoy for end-2024.

We expect Malaysia’s Real GDP growth to remain steadfast in 2H24 to end at +5.2% in 2024 vs. 3.6% in 2023, supported by (i) stronger domestic spending, (ii) stability and gradual improving labour market conditions, (iii) progressive income growth, (iv) execution of multi-year projects from approved investments, (v) resumption of global technology upcycle and (vi) recovery in tourism spending. End 2025 target kept unchanged at +4.6% yoy.

Headline and core inflation is projected to inch higher to +2.6% yoy and +2.5% yoy in 2024, which is in line with BNM’s projection of 2.0%-3.5% and 2.0%-3.0% respectively, impacted by the implementation of the diesel subsidy rationalisation and hike of the SST to 8.0%.

With expectations that BNM will maintain OPR at 3.0%, our 2024 year-end projection for USD/MYR is between 4.20-4.30, supported by the prospects of US interest rate cut(s) and steady economic improvements from structural reforms on the domestic front.

Market Outlook
Mon, 01 Jul 2024 07:45 am
2H24 Market Strategy - Navigating the Steady Upward Wave

Overseas developments such as prospects of interest rate cuts, US Presidential election results, along with the impact of removal of blanket subsidies locally will be in focus moving into 2H24.
Turning less aggressive and selective following the stellar 1H24 performance with preferences skewed towards selective sectors such as construction, property and technology that could demonstrate resiliency in earnings.
We are also upbeat on the (i) transportation & logistics sector that is capitalising onto trade diversion and most players embarking onto expansionary plans, (ii) renewable energy (RE) sector that is riding onto a slew of incentives outlined by policy makers, (iii) tourism sector taking off as the nation prepares for “Visit Malaysia Year 2025” and (iv) data-center supply chain players that are leveraging onto the AI and cloud computing boom.
Our 2024F and 2025F year-end target for FBM KLCI are 1,650 and 1,720 respectively, based on assigned 15.0x PE multiple, which is in line with longterm historical mean average.

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