Blue chip stocks bounce to boost Bursa

PublicInvest also said it was lowering its FBM KLCI year-end target to 1,590 points from 1,690 points previously due to “higher risk premiums”.

KUALA LUMPUR: The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) clawed back some losses from Monday’s knee-jerk fall on the prosperity tax with banking heavyweights making up lost ground yesterday.

At yesterday’s close, the FBM KLCI rose 6.71 points to 1,537.63 from 1,530.92 on Monday, sparked by banking stocks in the morning trading session.

Such activity though began to lose steam as the trading session went on.

However, most of them regained their momentum and ended the day either unchanged or higher.

CIMB Group Holdings Bhd closed five sen up to RM5.09; RHB Bank Bhd ended three sen higher to RM5.36; while Malayan Banking Bhd, Public Bank Bhd and AMMB Holdings Bhd ended the day unchanged.

Blue chip stocks, especially banks, took a hit to their share prices on Monday following the surprise announcement of higher taxes for very profitable companies under Budget 2022 to help the government alleviate its debt burden.

Last Friday, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said a one-off special prosperity tax would be imposed on companies that have a pre-tax profit of above RM100mil. Profit above that threshold would incur a tax rate of 33% for the year of assessment of 2022, instead of the initial corporate rate of 24%.

This is expected to largely affect companies in the banking, brewery, tobacco, utilities, gloves, telecommunication, automotive, palm oil and technology sectors.

Banks were among the top losers on Monday, as well as food and beverage players, which were weighed down by the higher excise duties on sugary drinks.

Analysts estimated that the windfall tax could shave off between 6% and 12% of corporate earnings, although this should be offset by the positive spillover to the broader economy from the expansionary budget proposals

An analyst said the hit to the share prices of blue chip stocks on Monday, especially banks, was likely a knee-jerk reaction to the Budget announcement.

“However, the rebound in the banking heavyweights’ share prices indicate that investors are still bullish on the prospects of local banks,” he said.

In a note, Maybank Investment Bank Research said it remains positive on banks as the pace of contraction in working capital loan applications is slowing and looks set to turn the corner.

“With the gradual opening up of the economy, we expect loan growth to strengthen in the coming months and maintain our industry loan growth forecast of 3.8% (annualised 3.4% end-Sep 2021),” it said.

Meanwhile, RHB Research said the healthy uptick in system loans in September, which offsets the month-on-month contraction in August, points to a sequentially stronger loan growth for the third quarter of 2021.

On the performance of the broader FBM KLCI, gainers outpaced losers 629 to 404, while 434 counters were unchanged, 808 untraded, and 15 others were suspended.

Regionally, Japan’s Nikkei 225 was down 0.43% to 29,520.9; the Singapore Straits Times Index rose 0.39% to 3,231.51; South Korea’s Kospi gained 1.16% to 3,013.49; while Hong Kong’s Hang Seng Index dipped 0.22% to 25,099.67.

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