TradeView Capital's Ng opined that investors are positive on the government’s efforts to rationalise subsidy and embark on fiscal consolidation.
PETALING JAYA: The stock market is pumped up ahead of Budget 2024 as the benchmark index FBM KLCI climbed for the fifth straight day, breaking the 1,440-point mark.
Several sectors such as construction, financial services and utilities were among the outperformers this week, bolstered by investors scouting for potential beneficiaries of budget measures.
With the support from local institutional funds as foreign investors paring down their net selling, the FBM KLCI has moved north by about 28 points or 2% in the last five days, closing at 1,443.82 points yesterday.
Speaking with StarBiz, TradeView Capital chief executive officer Ng Zhu Hann said the market “highly anticipates” Budget 2024.
“The market is looking forward to an expansionary budget.
“With the government expected to announce a development expenditure of RM94bil to RM97bil under Budget 2024, the market is looking forward to more public-funded projects and the stocks that may benefit from them,” he said.
Ng also opined that investors are positive on the government’s efforts to rationalise subsidy and embark on fiscal consolidation.
“A target subsidy approach would reduce the government’s bills and provide room for savings, which in turn could be channelled towards development projects,” he added.
Ng expects to see more allocation provided for infrastructures such as schools, hospitals and flood mitigation, which he said would directly address the needs of the mass population.
Construction players would benefit from such allocations, he added.
However, iFAST Capital research analyst Kevin Khaw Khai Sheng expects “limited upside potential” for the construction sector in Budget 2024.
“As the government is focused on reducing its fiscal deficit, we are unlikely to see the announcement of new mega infrastructure projects in Budget 2024, other than the ones already announced before.
“Perhaps, the government may provide details about the Mass Rapid Transit 3 project in the budget.
“But the lack of new mega projects under the budget would cap the upside for the construction sector,” he said.
Nevertheless, Khaw remains positive on the construction sector despite the recent rally in share prices.
He was also positive on the property sector, particularly on developers with large land banks in the Klang Valley and southern Peninsular Malaysia.
Bank Islam (M) Bhd chief economist Firdaos Rosli noted that the Mid-Term Review of the 12th Malaysia Plan (12MP) has been “silent” on new mega projects by 2025.
As a medium-term plan for the country, the 12MP serves as a guide for annual budgets.
When asked whether tax measures under Budget 2024 would adversely affect investors, Ng does not foresee a major tax announcement such as the goods and services tax that would dent sentiment.
“We may hear further information about the capital gains tax on the disposal of unlisted shares as well as luxury goods tax.
“But these taxes have been announced earlier, so the impact is largely factored in,” he said.
Khaw also thinks that the goods and services tax is unlikely to be mentioned in Budget 2024, considering the still-choppy economic conditions in Malaysia amid external uncertainties.
On his part, Ng hopes to see incentives or measures to encourage family offices in Malaysia to be announced in Budget 2024.
“A good family office structure in Malaysia would encourage the ultra-rich families to keep their wealth in the country and ultimately, would benefit the domestic capital market,” he said.
Meanwhile, Khaw expressed his hope that the government would embark on fuel subsidy rationalisation in phases, beginning with diesel.
“Budget 2024 should only touch on diesel subsidy rationalisation. Subsidy rationalisation for RON95 petrol should be done in the next phase.
“If both (subsidy cuts) are done simultaneously, it would have a major impact on people’s pockets,” he explained.
Bank Islam’s Firdaos pointed out that the consumer sector is an “industry of interest” ahead of Budget 2024.
“However, the planned subsidy rationalisation may weigh down the potential of this sector amid higher inflation while cost of living remains elevated.
“It all depends on the depth and width of the budget plan,” he said.
He also mentioned that investors in the export-led sector are likely waiting to see any plans to boost exports amid a global slowdown.
Looking ahead, Khaw foresees profit-taking activities to take place on the stock market next week, post-Budget 2024 announcement.
“Typically, as observed from the last two budgets, the FBM KLCI will rally ahead of the budget and would see some profit-taking after the tabling of the budget,” he added.
