Consumer sector en route to recovery
KUCHING: The consumer sentiment level rebounded by 9.1 points, suggesting that consumers have adjusted their spending pattern to take into account the impact of goods and services tax (GST) in their purchasing.
In a strategy report, the research arm of TA Securities Holdings Bhd ( TA Securities) noted that coupled with financial aids given by the government through BR1M, reduction in employees’ EPF contribution, and increase in minimum wage for private and public sectors workers that would be implemented on July 1 this year, this could lessen the impact of demand slowdown.
“This could benefit staple goods producers in the like of Nestle and QL Resources. All in, we are forecasting four per cent year- on- year ( y- o-y) increase in revenue for consumer companies under coverage,” it said.
In a separate report, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) also forecast stronger y- o-y growth in the second quarter of 2016 (2Q16).
“We look forward to 2Q16 results as it would be a good testament of how consumer companies have adapted or acclimatised one year postGST implementat ion. Our initial expectation was that the consumer would get used to the new costing environment.
“We are foreseeing stronger y- oy growth in 2Q16 due to the weaker base of 2Q15 as consumer spending slowed down in relation to the GST implementat ion, fur ther weakened by the pre- GST frontloading that took place in 1Q15,” it added.
“We think that the consumer sent iment is not dipping further and the transition period of one year post- GST should allow enough time for consumer to adapt while the sales growth recorded by most of the companies under coverage can support our thesis,” it opined.
However, it pointed out that the sentiment is still fragile on the back of uncertain economic outlook and it is also wary of the cost inf lation moving forward in view of the expiry of anti- prof iteering act and the implementation of minimum wage that take place in 3Q16.
Overal l , both Kenanga Research and TA Securities maintained a ‘ neutral’ view on the sector.