What stocks will the government focus on in the budget proposal, which is expected to focus on 4 main directions?

The 2025 fiscal budget proposal is approaching, and Da Securities believes that this budget will focus on restructuring the economic system, enhancing national competitiveness, and announcing new measures in 4 key directions.

These new measures include large-scale public infrastructure projects, digital economy, advanced semiconductor manufacturing, and artificial intelligence (AI), as well as increasing people's income and lowering the cost of living.

Following this line of thought, analysts have identified potential benefiting sectors and companies, and provided investment strategies ahead of the budget proposal.

Da Securities analysts point out that the government is expected to continue to focus on enhancing national competitiveness in the upcoming budget proposal to attract more investment, accelerate fiscal reforms, raise the standard of living, and distribute wealth more evenly.

"We estimate that the government will announce more details in the budget proposal about future national growth engines, such as advanced semiconductor manufacturing, carbon capture, utilization, and storage (CCUS), green industrial parks, AI, and xinjingji development corridors, as well as relevant new policies.

The analyst predicts that the critical measures the government will announce in the upcoming budget proposal will be focused on 4 directions.

First, the government is expected to announce details about major infrastructure projects, such as MRT Line 3, Penang Light Rail Transit (LRT), Automated Rapid Transit in Johor and Federal Territory (ART), Kuala Lumpur-Singapore High-Speed Rail (HSR), as well as more information on the new economic development corridors like Johor-Singapore Straits Economic Zone (JSSEZ).

Potential beneficiary stocks of large-scale infrastructure projects:

Secondly, analysts estimate that the government will continue to allocate funds to promote the digital economy, as well as the development of sustainable agendas, especially projects related to energy transition and renewable energy.

Potential beneficiaries of the digital economy:

At the same time, the analyst predicts that the government will make more announcements in the national semiconductor strategy, high value-added export industry, as well as investments related to AI, cloud computing, 5G, and other new technologies.

Potential beneficiary stocks in the semiconductor technology:

In addition, analysts pointed out that reducing the cost of living for the people and increasing disposable income are also one of the key focuses in the next fiscal budget.

The government may raise the minimum wage to a level between 1700 and 1800 ringgit, as well as increase tax exemptions and rebates to alleviate the potential negative impact of a possible increase in sugar tax.

Stocks with potential benefits from supporting people's livelihoods:

In addition, based on past records, the analyst predicts that the Malaysian stock market is likely to strengthen before the budget announcement.

Since 1998, there has been a 53.6% chance that the composite index will rise in the month leading up to the budget announcement. If we look at the two weeks before the budget announcement, the chance of an increase is even higher at 64.3%.

On the other hand, the probability of the composite index rising in the two weeks following the budget announcement is only 35.7%. However, the chance of an increase within a month is still at 57.1%.

Currently, the analyst maintains the composite index's year-end target of 1690 points for 2024, but with various favorable factors emerging, it may result in the Malaysian stock market performing better than expected.

The economic fundamentals in Malaysia are improving, the political situation is stable, corporate profit performance is strong, coupled with achievable long-term development plans, increasing interest from investors, especially foreign investors, in Malaysian stocks.