PETALING JAYA: The local bourse was expected to see a post-budget rally yesterday in the absence of a pre-budget rally, which would normally be followed by profit-taking activities after the country’s budget announcement.
According to TA Research, this contrasted with the performance between 1997 (Budget 1998) and 2023 (Budget 2024) where the probability of the FBM KLCI advancing in the one-month and two-week periods before the budget was 53.6% and 64.3%, and the total average return was 0.6% and 1.1%, respectively.
“This was mostly followed by immediate-term corrections where the benchmark index eased 64.3% of the time in two weeks post-budget and giving back all, if not most, of the gains,” it added.
However, the post-rally did not take place. The market was trading in negative territory, with the FBM KLCI closed down 1.23 points at 1,644.76 in the midday session yesterday.
The bellwether index recovered slightly to end the day marginally lower, down 0.31 points or 0.02% to 1,645.68 yesterday.
Areca Capital chief executive officer Danny Wong told StarBiz that the market seemed like a tad negative but the overall sentiment was fine with the budget expected to be a slightly non-popular one.
“The negative impact is obvious on labour cost (higher minimum wage and the Employees Provident Fund contribution for foreign labour), and the upward adjustment to the windfall profit levy threshold for crude palm oil, which saw the plantation sector getting the most hit.
“Besides, there was no upside surprise on big infrastructures mentioned, so the construction sector saw a bit of a pull back,” he said.
TA Research anticipated a post-budget rally after taking into account the solid measures announced in Budget 2025 to drive the economy and attract investments.
It added that the measures would contribute to better corporate earnings and the absence of new taxes, which if mooted, may crimp consumption.
The research house maintained its end-2024 FBM KLCI target of 1,690.
“This target is not unrealistic as the valuation is comparable to most of its peers and we expect the benchmark index to trend higher in 2025, provided there are no black swan events.
“These include the broader war in the Middle East, heightened trade tensions if Donald Trump returns as the US president, China’s failure to reinvigorate domestic demand and its exports tumbling due to trade restrictions,” TA Research said.
It pointed out that the local blue-chip benchmark stayed range bound in the one-month period prior to Budget 2025, starting off slow with choppy trade due to worries over weak economic growth in the United States and China dampening investor sentiment.However, trading activity rebounded, fuelled by rubber glove stocks, which rose on expectations the United States will soon finalise severe import tariff hikes on China’s medical gloves as well as the 50-basis points interest rate cut by the US Federal Reserve.
It subsequently eased, falling off a high of 1,675 on Sept 25, despite optimism over the strong ringgit and further interest rate cuts by the Fed and other key global central banks.
This was as traders switched focus to rising Middle East tension after Iran fired missiles again at Israel and the extremely robust North Asian stock markets, fuelled by intense bouts of stimulus from the Bank of China.
Meanwhile, UOB Kay Hian Research maintained its positioning for a higher year-end closing with no changes to its FBM KLCI target of 1,735.
“We still expect Malaysian equities to stage a reasonably good year-end uptrend, on the back of optimism in the first half of 2025 over China’s economic recovery, soft landing in the United States and the eventual cyclical recovery in the technology sector.
“Sentiment should also be boosted by a host of new data centre-related land sales, lumpy information technology project awards and merger and acquisition activities,” it said.
However, the research house highlighted that the pre-budget enthusiasm for the property sector was doused after the absence of mega projects being announced for the construction sector.
“Apart from the tax relief on interest loan for first-time homebuyers, 2025 offers fewer excitement to the property sector as there was no mention of the highly anticipated incentives related to Madani deposits grant or extension of Home Ownership Campaign and Johor-Singapore Special Economic Zone,” the research house added.
Its top picks are Gamuda Bhd
, Inari Amertron Bhd, IOI Properties Group Bhd, MyEG Services Bhd, Press Metal Aluminium Holdings Bhd, Public Bank Bhd, Pekat Group Bhd, RGB International and VS Industry Bhd.
