This article first appeared in The Edge Malaysia Weekly on February 27, 2023 - March 5, 2023

THE revised budget is a good start for the new government as it is creating a business-friendly environment with no major shocks, analysts say, which is a major step in drawing more foreign investors to the local bourse.

Loui Low, head of research at Malacca Securities, is of the view that the budget could provide more certainty to the investing fraternity.

“The negative performance in the FBM KLCI lately was due to the speculation of implementation of sin tax and capital gains tax. Since these two things are not seen in the budget, we can say that it is a positive budget,” he tells The Edge.

He agrees with Prime Minister Datuk Seri Anwar Ibrahim’s move to tackle more immediate issues such as high inflation, before looking at external matters such as bringing in more investment, which will be in the pipeline over the next few years.

“I think [Anwar] has thought about this quite thoroughly. So, at least it is not detrimental to the capital market at this juncture, given the volatility seen earlier because of the capital gains tax speculation.”

The benchmark FBM KLCI is down 2.6% year to date, underperforming its regional peers.

Areca Capital Sdn Bhd CEO Danny Wong shares the same view, noting that market uncertainty over concerns such as the extension of the prosperity tax, has been removed.

“Overall, I feel no bad news means good news. As long as there are no adverse policies, then I think it is a good start. I believe more pro-business policies will be coming up next,” says Wong, who thinks a clear takeaway from Anwar’s budget speech is that the government is trying to help the people as well as companies.

“Right now, the new government needs to stabilise the situation without giving signals that they will simply give out cash. That the government is also pro-business, without taxing more people. So, these are good signs.

“The target to cut the fiscal deficit to 3.2% over the medium term is good in the eyes of foreign investors,” he adds.

Wong also lauds the government’s plan to allow the listing of dual-class shares on Bursa Malaysia. Dual-class shares refer to the issuance of two classes of shares, one of which could have superior voting rights, often allowing founders or top executives to have control over the company even with ownership of a lower stake.

“With dual-class shares, funds can be raised without having to dilute the owner’s shares,” Wong observes.

Meanwhile, a research head who declined to be named foresees muted impact from the revised budget, but was of the view that the extension of tax exemption for companies listed on the ACE Market and LEAP Market, as well as tech stocks on the Main Market, will encourage more listings on the local stock market.

He is also positive on the construction sector in view of the increase in development expenditure, despite the lack of new mega projects.

Although the government is reducing individual income tax by two percentage points for those in the taxable income bracket of RM35,000-RM100,000, he thinks that the projected reduction of RM900 million in personal income tax collected from the M40 group may not have a significant impact on the consumer sector.

Low concurs, saying that people are likely to buy necessities with the extra income, as the multiple rounds of Employees Provident Fund withdrawals have reflected the pressures of high living costs.

However, he believes the planned upgrade of the Penang and Subang airports will benefit the tourism sector.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.