• Another expansionary budget at RM393.8bn focusing mainly to reduce the living costs of Rakyat. The development expenditure was reduced to RM90.0bn.

• Except for the increase of SST to 8% from 6%, the other measures were somewhat within the expectations.

• Targeted subsidies will be introduced for electricity and diesel in stages, while the government will remove the subsidy of eggs and chicken to allow floating prices.

• Some winners will include poultry, tobacco, breweries, technology, EVs, solar, construction, property and building materials. On the flipside, high value goods and sugary drink segments could impact by the introduction of sugar tax and luxury goods tax.

Summary

• Another Budget MADANI. As a continuation of the MADANI Economy framework, the Budget 2024 continues to expand at RM393.8bn, with RM303.8bn allocated for operating expenditure, while RM90bn is allocated for development expenditure (vs. RM97bn in 2023). Meanwhile, the government is expected to reduce the fiscal deficit to 4.3% in 2024 as compared to 5.0% in 2023 and grow the GDP at a rate of 4- 5%.

• Tourism activities to lead the services sector. For 1H2023, the services sector rose 6%, contributed by the wholesale and retail trade, transportation and storage and F&B and accommodation subsectors. We believe the travel related subsector to gain momentum in the second half following higher tourist arrivals and improved consumer spending. Meanwhile, we noticed the Construction sector will continue to chart strong growth for 2023-2024 at 6.3-6.8% respectively.

M+ Online view

• Neutral to a more positive budget. Except for the increase in SST from 6% to 8%, there were no major surprises in the Budget 2024. As usual, the budget will be providing support towards lower income groups, cash aids in the form of Sumbangan Tunai Rahmah to RM10bn from RM8bn in 2023 to cater for larger scope of population.

• More taxes within expectation. The SST could be expanding its scope towards logistics, brokerage, underwriting and karaoke services. Throughout the year, the government has been setting up the tone on the Luxury Tax (5-10%) and Capital Gain Tax (10% on unlisted shares). Besides, the Sugar Tax has increased from 40 sen/litre to 50 sen/litre.

• Subsidies rationalisation programme. Also within the expectation, the targeted subsidies were noticed within the poultry sector, removing the subsidy for eggs and chicken to allow floating prices. Meanwhile, the electricity and diesel subsidies will rationalise in stages.

• Winners. Allowing floating prices for eggs and chicken, coupled with the clamping down of illicit cigarettes and liquor products will be benefitting the poultry, tobacco and breweries sectors, while other beneficiaries include the technology, EVs, solar, construction, property and building material sectors.

• Losers. On the flip side, government plans to implement a global minimum tax for companies with global revenue of at least €750m (RM3.74bn) in 2025 could be a barrier for global companies to invest in Malaysia. Other than that, high value goods and sugary drinks may be negatively impacted under this scenario.

• The FBMKLCI and broader market may anticipate some profit taking activities. We believe the market may have already factored in positive catalysts over the past 2 weeks and the investors take profit next week. We expect the local catalysts such as the NETR and NIMP blueprints to provide upside potential going forward.

Source: Mplus Research - 16 Oct 2023