PETALING JAYA: Bursa Malaysia’s defensive qualities and policy trajectory from Putrajaya will ensure local factors dominate in how Bursa Malaysia performs in 2023, barring major macro shocks.
With the political backing for the unity government now more certain, analysts’ sights are now fixed on the re-tabling of Budget 2023.
“The budget could most likely be the major determinant on local market direction, as it offers clues on key priorities and initiatives for the new government,” said Tradeview Capital chief investment officer Nixon Wong.
The budget is expected to be tabled in Parliament on Feb 24, and analysts will have their eyes on the size of development expenditure as well as measures introduced to address the government’s fiscal positions, including the bloated subsidy bill.
The noise coming from Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim-led government about the trillion ringgit national debt level and review of contracts all indicate Putrajaya will be far more thrifty with its spending.
RHB Research, in a strategy report, said investors will be closely watching the ability of the unity government, especially the unity Cabinet, to knuckle down and work cohesively together in a manner that allows Anwar to implement his strategic vision.
“We think subsidy and fiscal reforms will be the acid test,” the research outfit noted.
Nixon believes the government’s concerns about managing cost of living and improving economic growth will lead to the implementation of economic-friendly and growth-accommodating policies that will potentially support further corporate earnings recovery and attract more inflows to support the market.
He expects private consumption to remain robust as any subsidy rationalisation will likely be limited in scope.
“We are optimistic on the local equity market for the reason that the potential domestic economic downturn might not be as deep or long-lasting as feared; private consumption should remain robust, while FBM KLCI earnings growth set to accelerate from 2022 in the absence of the one-off prosperity tax and earnings drag from the glove sector,” he said.
He added that the more stable government bodes well for improved governance and expedited policy making.
The FBM KLCI closed a fraction away from its psychological 1,500-point level at 1499.38 yesterday. The index has been edging higher since mid-October in tandem with major global indices.
Foreign research houses like HSBC and CLSA, however, expect most foreign investment flows into the emerging markets to find better value in India and North Asia instead of Bursa Malaysia.
Not surprisingly, the China reopening theme saw a rally on the mainland and Hong Kong markets but received a muted response from investors on Bursa Malaysia but that could change in time.
“The muted response could be due to the local market taking a breather post-15th General Election rally, which saw the FBM KLCI and Small Cap Index rose by more than 3% and 8%, respectively, since then.
“We think China’s reopening will bring the much needed impetus to the global economy and Malaysia would be one of the beneficiaries,” said iFAST Corp Ltd research manager Jason Wong.
Another factor is that a mere 10% weight or less of the FBM KLCI component stocks are exposed to the China market, namely companies like Sime Darby Bhd, Genting Group, Inari Amertron Bhd and Press Metal Aluminium Holdings Bhd.
Given the prospect of slowing global growth, Nixon said better-than-expected gross domestic product growth from local consumption and private investments could lift market sentiment.