PETALING JAYA: Post-tabling discussions of Budget 2025 have argued that the latest edition of Malaysia’s financial targets are centred around pressing on the effort to narrow the country’s deficit while keeping an eye on public welfare.
However, with one of its pillars being to “revitalise the economy” – in addition to generating change and improving Malaysian lives – it is reasonable to take stock on how the country can be rejuvenated, particularly in terms of investments being channelled towards various business sectors.
At the forefront of the matter for Rakuten Trade head of equity sales and experienced analyst Vincent Lau is the increase in the minimum wage to RM1,700 from the current RM1,500 beginning in February, which should give the consumer staples sector a shot in the arm.
The policy to increase wages is supported by a RM200mil allocation, and is expected to benefit approximately 50,000 workers.
“Aside from that, companies in the ‘sin’ sectors are also anticipated to do well without any extra taxes levied on their products and services, while local automotive players like Proton Holdings Bhd and Perusahaan Otomobil Kedua Sdn Bhd (Perodua), as well as their business associates such as newly-listed KHPT Holdings Bhd, will also stand to gain,” he told StarBiz.
His prediction on the automotive industry stems from his prediction that Malaysians could be looking to trade down on motor vehicles, after the government confirmed it will be rolling out targeted subsidies on the RON95 fuel, although still making the assumption that 85% of Malaysians will be exempt.
Additionally, despite the trepidation surrounding the construction sector following the government’s deafening silence on announcing new projects during the tabling of Budget 2025 last Friday, Lau is maintaining a sanguine outlook on the industry, expecting it to perform reasonably well.
This is due to the momentum from the major infrastructure projects that have been announced, including the mass rapid transit three, the Penang light rail transit and the Pan Borneo Highway projects, as well as works that are in tandem with the influx of data centres to be commissioned around the country.
Among the expected key beneficiaries of the wage hike is 99 Speed Mart Retail Holdings Bhd, to which he attributed possible entrance of foreign funds to its share price increase since its listing early last month.
Meanwhile, chief investment officer of Tradeview Capital, Nixon Wong, believes the banking, renewable energy (RE) and artificial intelligence and data centre-related industries such as telecommunications and utilities will also do well in 2025.
“We continue to like banks on their persistent fiscal discipline to take the country forward and sustain long-term economic growth, and we are also positive on the ringgit.
“At the same time, we find that an increasing compliance to environmental, social and governance practices to reduce carbon emissions could bode well for the RE sector,” Wong said.
While agreeing with Lau that the future looks bright for selected consumer stocks next year on the basis of the increased minimum wage level, he predicts the phenomenon will drive consumption trends higher.
Notably, he expects elevated operating costs from having to raise the minimum wage for businesses to be passed on to the consumer, which in turn leads to higher inflation, outlining the delicate balance between upping wages and controlling inflation.
In addition, Wong pointed out that the healthcare equipment industry should also attract more fund inflows from foreigners as more hospitals embark on expansion exercises.
On this point, head of Asia equity strategy at HSBC, Herald van der Linde, anticipates that the data centre, power and semiconductor equipment sectors will be the focus of investments in Malaysia and will continue to attract foreign interest, on top of the electric vehicle (EV) industry and the EV components subsector.
Outlining an out-of-the-box way to leverage on all these industries, he suggested investors can play this through Malaysian banks, given they have exposure to all these investment trends.
“In addition, the utilities sector has exposure as well, in particular to the rising energy demand in Malaysia,” he opined.
From a more practical perspective and advice that the on-the-street hustler can use immediately, seasoned investor Ian Yoong offered another tip: “My preferred sectors are small-medium capital (small-mid cap) property developers and food manufacturers.”
Interestingly, he said the common denominator is that these sectors are in the doldrums and are at the low point of their respective business cycles, he said.
Elaborating, he advised investors to look out for small-mid cap property developers that have sound balance sheets, are trading at low price-over-book valuations and are at single digit price-to-earnings ratios.
“The positive element in Budget 2025 is that there will be tax relief on housing loan interest payment.
“The wide disparity in mid and upmarket residential property prices in Malaysia and our Asean neighbours is glaring.
“For example, condominium prices in central Bangkok are 30% to 45% higher than those in the Kuala Lumpur City Centre,” Yoong noted.
