HLIB EXPECTS IMPROVED CONSUMER SECTOR
BR1M payments, tax cuts and other cash handouts to lift spending, says HLIB
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THE consumer sector is likely to improve this year, underpinned by rejuvenation of consumer sentiment, ringgit’s appreciation and improved tourist arrivals.
Hong Leong Investment Bank (HLIB), in a research note released yesterday, said consumer spending would likely be stimulated by 1Malaysia People’s Aid (BR1M) payments, tax cuts and other cash handouts.
“Currently, consumer stocks are trading at historical highs with the Kuala Lumpur Consumer Price Index trading at 32 times price-earnings ratio (P/E) or two standard deviations above its five-year average P/E of 23.5 times.”
Consumer sentiment rebounded slightly last year as it continued to normalise after the implementation of Goods and Services Tax in April 2015.
HLIB noted that the 2018 Budget contains various measures aimed at boosting consumer spending.
About RM13.1 billion worth of BR1M payments, lower income tax, increases in senior disabled people allowance as well as civil servants, government pensioners and Felda settler handouts are expected to spur consumer spending.
The investment bank expects ringgit to average stronger this year between 4.00 and 4.20 against the US dollar, attributed to firmer oil prices, capital inflows and Bank Negara Malaysia’s foreign exchange measures.
The National Wages of Consultative Council has also indicated there is possibility of a minimum wage hike this year.
Therefore, HLIB has maintained its “neutral” recommendation on the consumer sector for this year.