PETALING JAYA: The upcoming Budget 2025, the last annual federal budget under the 12th Malaysia Plan (12MP), is expected to focus on enhancing the economic fundamentals of the country by being pro-growth and friendly to foreign direct investment.
UOB Kay Hian (UOBKH) Research said in a report that Budget 2025 would be largely market-neutral but “sets a solid fundamental undertone for future economic growth and the equity market, and is supportive of the ringgit’s upward momentum”.
The research house expects it to be expansionary while remaining fiscally prudent as the government focuses on improving the people’s wellbeing.
“Among the key budget measures are subsidy reduction, introduction and the raising of various taxes and minimum wage hikes,” it added.
The expansionary budget, while ensuring a narrower fiscal deficit of 3.8% versus the estimated 4.3% in 2024, would be due to targeted cash aid, salary increases for civil servants, increased special grants for Sabah and Sarawak and potentially higher supply and service expenses.
As part of the government’s promise to strengthen governance and public delivery while at the same time lower operating expenditure, the push for a proper monitoring framework and intention to leverage private sector involvement in public projects would be expected to continue.
Further subsidy rationalisation should be expected, including the extension of targeted diesel subsidies to East Malaysia, subsidy cuts for RON95 petrol and revisions for food-related subsidies, with new taxes and policies such as high-value goods tax, global minimum tax of 15%, new sugar-sweetened beverage tax and mandatory e-invoicing system.
“We also expect more incentives to be announced for the technology, green-related, the micro, small and medium enterprises and tourism sectors,” it said, with more initiatives to complement government-linked companies’ commitment to enhance domestic investments.
A key beneficiary would be the property sector from the extension of the Home Ownership Programme and possibly the launch of the Madani Deposit Scheme and Developer Interest Bearing Scheme-like initiative, as well as more positive news for the Iskandar Region in Johor.
Among property stocks, the top picks include IOI Properties Group Bhd
as well as Budget 2025 beneficiaries Lagenda Properties Bhd, an affordable housing developer, and Eco World Development Group Bhd, a proxy to the Iskandar Region play.
There may not be many announcements on major infrastructure projects, with construction industry experts noting that a number of projects such as the MRT3, High Speed Rail, Penang LRT, Pan Borneo Highway Phase 1B, Johor Autonomous Rail Transit and highways like Duke Phase 2A may be mentioned during the tabling of the budget, but not rolled out next year.“Such expectations suggest a more subdued stock market response,” UOBKH Research said, adding that its end-2024 FBM KLCI target of 1,735 has been maintained.
The research house expects Malaysian stocks to stage a reasonably good year-end uptrend despite current market volatility on catalysts such as Iskandar Region news flow, more prominent data centre land sales, government IT project awards as well as merger and acquisition activities.
Other stocks in the research house top pick list include wage hike beneficiary MR DIY Group Bhd as well as Gamuda Bhd, Inari Amertron Bhd, MyEG Services Bhd, Public Bank Bhd, Pekat Group Bhd, RGB International Bhd and VS Industry Bhd.
