THE consumer sector will benefit from the measures introduced under Budget 2018 to support household spending in Malaysia.
With a lower income tax for the 2018 year of assessment and higher income for civil servants, and cash handouts through next year, companies in the food and beverage (F&B) and retail industries are likely to see higher sales.
Separately, the absence of a sin tax hike is a relief to brewers and tobacco companies operating in the country.
According to several analysts polled by StarBizWeek, among the consumer stocks that will benefit from the budget are Nestle (M) Bhd , Fraser & Neave Bhd (F&N), Kawan Food Bhd , Hup Seng Industries Bhd and Berjaya Food Bhd; agro-food producers QL Resources Bhd and CCK Consolidated Holdings Bhd ; retail players Padini Holdings Bhd , Bison Consolidated Bhd and 7-Eleven Malaysia Holdings Bhd ; and sin companies Carlsberg Brewery (M) Bhd and British American Tobacco (M) Bhd (BAT). They noted that the budget is a consumer-friendly initiative that would have a positive impact on the consumer sector.
“The Government is moving to put more money in the pockets of the people in the hope that it will increase household spending in Malaysia, and thus, support the country’s economic growth,” an analyst with a local brokerage says.
“The low to middle-income groups tend to have a higher propensity to consume when their disposable income rises, so companies in the consumer sector will benefit,” he explains.
Most consumer-related stocks rallied yesterday, lifting the Bursa Malaysia Consumer Product Index higher by 1.86 points, or 0.3%, to close at 625.58 points.
Among the consumer stocks that rallied yesterday were Nestle, which gained 40 sen to close at RM87; F&N, which rose 20 sen to RM25.20; and PPB Group Bhd , which increased 14 sen to RM16.80.
Carlsberg was the only company from the sin sector that saw its shares rallying, rising 18 sen to close at RM15.68, while BAT fell 28 sen to RM40.50 and Heineken Malaysia Bhd shed two sen to RM18.86.
A broker notes that while the budget is generally positive for consumer stocks, the favourable impact will likely take time to flow through.
“There is clearly a conviction by the Government to stimulate consumer spending in an effort to drive economic growth. While many stocks will likely see the knee-jerk reaction of a rally, not all will see the impact reflected in their share prices immediately.
“For one thing, some stocks are already overvalued at their present levels. For another, the benefits from Budget 2018 will take time to flow through – for instance, the impact of the lower income tax will only be felt in 2019,” the broker explains.