Budget to impact corporate sector

KUALA LUMPUR: Budget 2014, which was unveiled last Friday, is expected to bring cheers to some corporations but others could see knee-jerk reaction from investors.  

According to heads of research and fund managers, sectors that could be lifted by the latest budget include construction, oil and gas (O&G), telecommunications and media.  

Conversely, stocks that could face knee-jerk reaction from investors are those in the consumer and property development sectors.

“Budget 2014 should be well-received by the financial markets as the commitment towards fiscal reform is something that investors in the bond and equity markets have been hoping for,” MIDF Amanah Investment Bank Bhd head of research Zulkifli Hamzah told The Edge Financial Daily.

Areca Capital Sdn Bhd CEO Danny Wong Teck Meng said the construction sector is set to be a major beneficiary as the mega projects announced could beget more developments surrounding those projects.

“The mega projects could encourage infrastructure development. Take, for example, the announcement on the refurbishment of rural roads ... it can bring more traffic volume to the areas concerned,” he said.

The government has allocated RM980 million for the refurbishment and upgrading of 437km of rural road networks nationwide. Another RM500 million will be provided for the Pan-Borneo Highway project.

Affin Investment Bank Bhd vice-president and head of retail research Dr Nazri Khan said the projects singled out by the government in the budget will likely benefit certain stocks. These projects are the 316km West Coast Expressway and the double-track railway from Ipoh to Padang Besar, as well as Petroliam Nasional Bhd-related O&G projects.

Nazri said these priority projects are likely to benefit the O&G, technology, power and construction sectors. He said stocks such as Petronas Chemicals Group Bhd, Petronas Dagangan Bhd, Dayang Enterprise Holdings Bhd, Uzma Bhd, Deleum Bhd, Coastal Contracts Bhd, Tenaga Nasional Bhd, YTL Power International Bhd, Gas Malaysia Bhd, Gamuda Bhd, IJM Corp Bhd, Pos Malaysia Bhd, Malaysia Airports Holdings Bhd, DKSH Holdings (M) Bhd, My EG Services Bhd and Globetronics Technology Bhd will be in the spotlight soon.

A head of research at M&A Securities pointed out that fewer new projects were announced in the budget.

“Many of the projects have already been announced under the Economic Transformation Programme. Even with the announcement of the upgrading works of several airports, it will be very hard to say who will benefit. The projects could go to small players,” she said.

Wong said the government’s plan to improve the nation’s Internet connectivity will be a boon to the telecommunications and media groups.

“Increasing Internet access speed throughout Malaysia will encourage the usage of smartphones. But it’s not just the mobile telecommunications providers that will benefit. Fixed-line providers will also get a major slice of the pie as there will be more users having access to high-speed broadband (HSBB).

“Indirectly, media groups can benefit from this when their premium services like high definition television and HSBB offerings get a wider reach,” he said.

Prime Minister Datuk Seri Najib Razak has announced that the government is going to roll out the second phase of the HSBB project, involving an investment of RM1.8 billion, which will see the Internet access speed being increased to 10Mbps. This will benefit 2.8 million households.

Wong also said the introduction of the goods and services tax (GST) on April 1, 2015 is positive for Malaysia’s economy going forward. However, he said, there may be a knee-jerk reaction to consumer stocks upon the opening bell today.

“The GST rate [of 6%] is slightly higher than what was expected earlier. So we won’t know if retail sales could be affected going forward,” he said.


This article first appeared in The Edge Financial Daily, on October 28, 2013.