PETALING JAYA: Consumer sentiment will likely stay subdued, despite the anticipated rise in disposable income.
According to RHB Research, elevated inflationary pressures – with income levels taking time to catch up to the increase in living costs – are expected to weigh on consumer sentiment.
“This would compel inflation-weary consumers to stretch their money by downtrading, being more price-sensitive and seeking better value, thereby capping overall discretionary spending,” the research house said in a report yesterday.
RHB Research expects consumer spending to remain anchored by a robust employment market and continuous government assistance for lower-income groups, such as cash handouts and subsidies.
It noted that disposable income will be supported by wage hikes in both the public and private sectors. The upsized cash handouts totalling RM13bil for 2025 will also help consumers manage the rising costs.
“The positive momentum of tourist arrivals, too, is a boon for the sector – particularly for the consumer retail companies – whilst the jump in crude palm oil prices should boost consumer spending in rural areas.
“Meanwhile, for the consumer companies, the relatively stronger ringgit as well as more favourable and stable commodity prices should help protect their profit margins,” RHB Research said.
However, it cautioned against the inflationary impact that may arise from targeted petrol subsidy rationalisation.
The research house kept its “neutral” call on the sector with top picks namely MR DIY Group (M) Bhd
, Farm Fresh Bhd, Focus Point Holdings Bhd and Guan Chong Bhd.
It has a “buy” call on these counters with target prices of RM2.35, RM2.11, RM1.20, and RM6.22 per share, respectively.
“We prefer companies that benefit from solid demand, which grants them pricing power to mitigate rising operating costs brought about by the higher minimum wage,” it added.
