Highlights

• More money is put into the rakyat’s pockets thanks to a RM100 pay rise for all civil servants between Grade 11 to Grade 56 and those under Grade 56 will get a one-off RM700 social aid, while vulnerable single parents, households and individuals will receive RM3,000, RM2,500 and RM1,250 each under the RM7.8b Bantuan Keluarga Malaysia scheme.

• The M40 group will also not be left out with a 2% reduction in income tax for those earning between RM50k-RM100k annually. Similarly, micro SMEs will benefit from a 2% reduction in income tax for the first RM100k earned. There is also RM10m in matching grants to SMEs.

• A job programme called MyStep is poised to create 50,000 jobs in the public sector and GLCs. There are also programmes to upskill workers as well as to groom entrepreneurs. Incentives are given to employers to hire the disabled as well as jobless youths.

• There is good news for contractors given that gross development expenditure in 2023 is projected at RM95b, up 32% vs. RM71.8b estimated for 2022. In terms of allocation by region, Budget 2023 earmarks RM11.7b for Sabah and Sarawak.

• The recovery of the tourism industry will be accelerated via the introduction of a RM1b tourism infrastructure fund that will be channeled into hotel rehabilitation, urban renewal and heritage restoration.

• A special status has been proposed for Pengerang, alongside incentives for chemical and petrochemical industry investment in the petrochemical hub.

• There is a small consolation for the property sector with the stamp duty exemption for the purchase of house priced above RM500k to RM1m by a first-time buyer being raised to 75% from 50%.

• There are initiatives to promote technology and digitalisation including a RM100 e-wallet credit for 8m people in the M40 group and a RM100m support fund for home-grown technology companies.

• There are allocations to support environment protection, particularly, flood mitigation via, among others, the construction of retention ponds and widening of rivers, as well as forest restoration.

• Other ESG initiatives include RM165m allocation to TENAGA to set up solar rooftops and EV charging stations, a RM3b green technology financing scheme and the introduction of carbon tax (although no timeline is specified).

• To encourage the ownership of electric vehicles (EV), the full exemption of import and excise duty for CBU models is extended until the end of 2024, while the exemption for CKD units is maintained until the end of 2025.

• To drive green investments, the deadline for applications of the Green Investment Tax Allowance (GITA) dan Green Income Tax Exemption (GITE) is extended to 31 Dec 2025.

• We maintain our end-2022 FBM KLCI target of 1,500 pts based on 15.5x 2022F earnings projection (-9.4%). We continue to advocate investors to seek refuge in domestically driven sectors including banks, telcos, auto makers/distributors, mid-market retailers and construction players, amidst rising external headwinds. These sectors are also the clear winners of Budget 2023 which is highly supportive of domestic consumption.

Source: Kenanga Research - 8 Oct 2022