Budget 2024 pro-growth to supply sectors and boosts equity market - Maybank IB

15 Oct 2023 12:48pm
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KUALA LUMPUR - Maybank Investment Bank Bhd (Maybank IB) reckons Budget 2024 is pro-growth to all sectors in the supply-side economy and set to positively benefit Bursa Malaysia, led by the construction, services and manufacturing sectors.

"Budget 2024 sustains fiscal consolidation and aligns allocations and incentives with the recently announced policy frameworks like the Madani Economy, 12th Malaysia Plan (12MP) Mid-Term Review (MTR), National Energy Transition Roadmap (NETR) and the New Industrial Master Plan 2030 (NIMP 2030), thus benefitting sectors like construction/infrastructure, micro, small and medium enterprises (MSME), electronics, chemical/petrochemicals, renewable energy and electric vehicle, startups, tourism, Islamic finance and halal, food security and global services hub.

"We are overall positive on the Budget 2024 measures. We maintain our 2023 year-end FBM KLCI target at 1,520," Maybank IB said in its Malaysia Budget 2024: Sustaining Fiscal Consolidation report.

During the tabling of the yearly budget, the government allocated a gross development expenditure of RM90 billion for 2024, which was higher compared to the investment bank's estimate of RM83.6 billion in 2023.

The RM90 billion constitutes 4.5 per cent of gross domestic product (GDP).

It said the government also reiterated fiscal consolidation commitment in Budget 2024, targeting a smaller fiscal deficit of 4.3 per cent of GDP in 2024 with a view of lowering the deficit further to at least 3.0 per cent in five years, in line with the Public Finance and Fiscal Responsibility Bill 2023.

For 2024, the smaller deficit will be achieved via further blanket subsidies removal (i.e. for diesel) and a combination of new (i.e. capital gains tax, luxury goods tax) and higher indirect taxes (service tax rate)

Maybank IB said the construction sector is a beneficiary of higher development allocation amid upcoming new projects like the Klang Valley Light Rail Transit 3's new stations, nationwide flood mitigation programme, and Penang LRT project.

Development allocation has also been raised for Sabah and Sarawak in 2024.

On top of that, selected players in the software technology sector stand to gain from Budget 2024's targeted measures to accelerate digital infrastructure development and adoption,

Budget 2024's sizeable allocation of RM1.6 billion for Human Resource Development Corporation's training and upskilling programmes, while grants for SME digitalisation and automation will also directly benefit e-payment solution providers.

Meanwhile, the consumer sector will benefit from the removal of poultry subsidies and price control as it will enable efficient cost-pass-through mechanisms to be implemented, and allow market demand and supply forces to dictate the average selling price fluctuation of live broilers and eggs.

It also believes the aviation sector is a key beneficiary of higher allocation to boost tourism and promote tourism activities ahead of Visit Malaysia Year in 2026 (deferred from 2025) and the commitment to relax the requirements for Malaysia My Second Home applications should benefit the property industry in both the rental market and property demand.

"The imposition of a flat 4.0 per cent stamp duty on foreign buyers is however not expected to significantly affect property demand as the rate is still considerably lower than Singapore's stamp duty rate of 60 per cent," it noted. - BERNAMA

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