Budget 2018 likely to continue assistance for consumer sector

KUCHING: The upcoming Budget 2018 is projected by analysts to continue with providing government assistances to the lower income bracket population.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the allocated allowance to 1Malaysia People’s Aid (BR1M) recipients had progressively increased with the last Budget 2017, raising the allowance for households with a monthly income below than RM3,000 to RM1,200 from RM1,050.

“A subsequent increase would be a welcomed change as consumer spending has been suppressed by the rising cost of living and the added assistance could reinvigorate consumption,” it said.

In the meantime, Kenanga Research believed corporates could potentially register better earnings for the third quarter of current year 2017 (3QCY17) on the back on lower forex and average commodity price exposure to expand profit margins.

On another note, the research arm was not expecting any changes in excise duties towards brewers and tobacco players in light of the rampant illicit trades from goods being more inaccessible, price-wise.

Hence, it believed further deterrents through pricing may further escalate the issue.

On recommendations, Kenanga Research maintained its ‘neutral’ view on the consumer sector in its latest sector update.

“The softer commodity prices could alleviate cost pressures while easing inflationary pressures and better macro environments could potentially translate into perkier consumer spending in the medium-term,” the research arm said.

However, as sentiment levels remain at a low ebb undermining organic growth potential in addition to most stocks already trading at its perceived fair values on their limited medium-term prospects, the research arm maintained its weightage for the sector.

As for the sin sub-sector, Kenanga Research also maintained its ‘neutral’ rating.

“The outlook for the tobacco industry may see a turnaround with the first recorded decline in monthly illicit market share,” it said.

“However, illegal trade still accounts for more than 50 per cent of the industry market share and requires extensive efforts to bring about meaningful outcomes.

“The outlook for brewers is more favourable with the general increase in operating efficiency and product developments continuing to spur demand.”

A subsequent increase would be a welcomed change as consumer spending has been suppressed by the rising cost of living and the added assistance could reinvigorate consumption.