Smart Investor Malaysia


Post 2023 Budget And Q4 Market Outlook Commentary By Rakuten Trade


Rakuten Trade recently held an event for the media and presented their thoughts about Budget 2023 and their market outlook for the remainder of 2022. Kenny Yee, Head of Research and Thong Pak Leng, Vice President of Equity Research were on hand to explain more about their findings.

Budget 2023

A Budget for the whole spectrum of population

Payouts for the underprivileged and more surprisingly, tax cuts for theM40 should ease the burden of prevailing high prices. Though disposable income will improve from tax cuts, intention is to alleviate the impact from prospective higher interest rates environment going forward.

The potential creation of 50,000 job opportunities should lessen worries for the fresh graduates aka the Youths. SME owners should also rejoice by the 2% tax cut.

Contractors will benefit

The record high allocation for development amounting to RM95 billion emphasizes the dire need to revive the nation’s economy. As we are aware, the construction sector offers the highest multiplier effect hence once this sector commences cranking up activities, the positive impact should spread across other subsegments as its linkages are immense.

Budget impacts on five sectors

1. Automotive sector

Full exemption of import and excise duty for electric vehicles (EV) for CBU (completely-built-up) extended until 31st December 2024 (CKD exemption is still the same until 31st December 2025).

2. Construction sector

High development expenditure of RM95 billion – a 32% increase from the estimated amount in 2022.

3. Consumer sector

Though higher disposable income is positive from the cash support for M40, B40 and students which are expected to increase consumer spending on goods and services such as F&B and daily essentials. We believe the impact is minimal in view of the prevailing high prices.

4. Property sector

75% stamp duty exemption (from 50% prior) for houses worth RM500k to RM1 million for first time home buyers. The additional 25% stamp duty exemption for houses worth RM500k to RM1 million allows first-time home buyers to save an additional RM2,800 to RM7,100.

5. Technology sector

The allocation of e-money incentives for the M40 group and youths worth RM800 million and RM400 million, respectively, which will further accelerate the adoption of cashless transactions.

Market Will Remain Volatile

Performance of the local bourse has been immensely impacted by global uncertainties primarily from the US. The heightened market volatility have had created ripples across the region as well.

Commodities were not spared either as both the CPO and crude oil underwent wild gyrations. The CPO from the high of RM7,200 to now RM3,800 while the Brent crude from around USD130 to now USD98.

As for corporate earnings, we noticed a downward revision for CY22 from 4.3% to now circa. 1% mainly attributed to the cuts for Manufacturing and Utilities sectors.

Nonetheless, CY23 earnings growth should shine with 6.8% due to upgrades for Banks despite lower estimates for both Plantation and Manufacturing.

Regional volatility remains high with some above the last 2 years. Unlike the rest, Malaysia’s volatility remains below the region as the local bourse is a captive market. Nonetheless, we expect volatility to heighten in view of the anticipated “hard landing” in the United States.

Regional Currency Turmoil

Due to the incessant rate hikes by the Federal Reserves, the USD has had strengthened against all regional currencies. The USD movements has instigated most central banks to be on defensive mode to tame prevailing turmoil amongst the global currencies.

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