PETALING JAYA: Budget 2027 could provide a mildly positive read-through for Malaysian equities, with targeted measures to support household consumption and corporate margins expected to outweigh the impact of continued fiscal consolidation and potential cost pressures on businesses.
“For equities, we are of the view that Budget 2027 will be supportive of the market, but is unlikely to be a major catalyst,” CIMB Securities noted in a report yesterday.
The research house further added that CIMB Treasury & Markets Research estimates the underlying fiscal support could add around 0.1 percentage point to real gross domestic product growth, suggesting limited scope for a broad-based earnings upgrade cycle.
“Instead, we see the potential equity benefits as sector- and stock-specific, particularly for construction and infrastructure, mass-market consumption, utilities, and data centre infrastructure enablers,” the research house said.
CIMB Securities said it views the consumer and construction sectors as key potential beneficiaries.
“An increase in the total allocation for Sumbangan Tunai Rahmah/Sumbangan Asas Rahmah to about RM17bil (from RM15bil), alongside potential middle- income tax relief and a minimum wage hike to RM1,800 to RM2,000 per month, could support household disposable income and consumption.
“This would benefit consumer names, namely value retailers like 99 Speed Mart Retail Holdings Bhd
, Eco-Shop Marketing Bhd and MR DIY Group (M) Bhd, as well as food and beverage manufacturers including Nestle (Malaysia) Bhd, Life Water Bhd and QL Resources Bhd.”
CIMB Securities said one area that could have a more direct impact on corporate earnings is further refinement of the expanded sales and service tax framework.
“CIMB Treasury & Markets Research assumes around RM1bil in revenue foregone from potential additional business-to-business and production input exemptions.
“Broader exemptions could reduce tax cascading across supply chains and provide some margin relief to affected companies,” the research house added.
Potential beneficiaries include the construction, manufacturing, logistics, and agriculture sectors, alongside selected exporters.
“However, the eventual impact will depend on the scope of exemptions and whether the government introduces a broader mechanism to alleviate taxes embedded in intermediate inputs,” CIMB Securities said.
The research house noted that construction could benefit from higher development expenditure and spending on water, flood mitigation, transport, grid, and Sabah and Sarawak infrastructure.
Gamuda Bhd, IJM Corp Bhd, Malayan Cement Bhd, and Insight Analytics Sdn Bhd are among those well-positioned to gain.
“We believe potential beneficiaries of development expenditure expansion would be concentrated among contractors and suppliers exposed to water infrastructure and pipe replacement, flood mitigation, rural infrastructure, grid investment, and projects in Sabah and Sarawak.
“However, we would focus on project awards and execution rather than headline allocations, as some allocations may relate to balance of works for ongoing jobs rather than new tenders.”
CIMB Securities pointed out that the potential downside risks from Budget 2027 are higher labour costs and reduced fiscal headroom.
“A higher minimum wage could raise costs for labour-intensive plantation, manufacturing, and services companies, although CIMB Treasury & Markets Research views an immediate increase in the multi-tier foreign worker levy as unlikely, given existing cost pressures.”
According to CIMB Securities, a potential carbon tax could weigh on steel and other carbon-intensive industries.
Meanwhile, a proposed electric vehicle (EV) sales levy to fund charging infrastructure could hurt automakers by raising purchase costs and dampening demand, though continued completely knocked-down incentives should favour locally assembled EVs.
“A sustained energy price shock could also raise subsidy costs and constrain fiscal space,” the research house said.
