Top Picks From Analysts Following Budget 2025

Moomoo News MY wrote a column · Oct 21 19:58

On October 18, 2024, Malaysia presented its largest-ever budget in Parliament, with the theme "Revitalising the Economy, Generating Change, Prospering the Rakyat." Here's a brief breakdown of the key highlights from Budget 2025:

· The total allocation for Budget 2025 is RM421 billion, an increase from the revised RM407.5 billion in 2024. Of this, RM335 billion is earmarked for operational expenditures, and RM86 billion for development expenditures.

· The fiscal deficit for 2025 is targeted at 3.8%, down from 4.3% in 2024. The fiscal deficit is expected to average 3.5% over the period from 2025-27, in line with the Medium-Term Fiscal Framework. The medium-term fiscal deficit target is set at 3% under the new Public Finance and Fiscal Responsibility Act 2023.

Economic Forecast: GDP growth for 2025 is projected between 4.5% and 5.5%. The GDP growth forecast for 2024 has been revised to 4.8%-5.3%.

Tax Policy:

· The scope of the Sales and Services Tax will be expanded from May 1, 2025, and implemented more progressively. Basic food items will be exempt from the sales tax, while luxury goods will be taxed. The service tax will also extend to include chargeable financial services.

· A 2% tax on dividend income exceeding RM100,000 is proposed starting in the 2025 tax year, exceeding market expectations. Exemptions for government fund dividend incomes are also under consideration.

· Direct tax collection in 2025 is expected to increase by 6.6% to RM188.8 billion.

Subsidy Rationalization:

· A rationalization of the RON95 fuel subsidy is planned for mid-2025; health and education subsidies will also be rationalized.

· Support for farmers and fishermen will increase from RM2.6 billion to RM2.78 billion.

Investment Initiatives: Under the Government-Linked Entities Activation and Reform (GEARuP) plan, government-linked companies and investment funds are committed to contributing RM120 billion in domestic direct investments over the next five years (2025-2029). Additional initiatives include PPP/PFI projects, the new Investment Incentive Framework (NIIF), and the The Johor-Singapore Special Economic Zone (JS-SEZ).

Top Picks From Analysts Following Budget 2025

Investment Insights From Analysts

Construction Sector: Despite a reduction in development expenditure, the construction sector remains favored by the market. In Budget 2025, the government has allocated RM2.8 billion for federal road maintenance and RM5.5 billion to the MARRIS fund for national roads. Furthermore, 12 flood mitigation projects worth RM3 billion have been greenlit and are progressing as planned. MIDF Research identifies the construction industry as a primary beneficiary of Budget 2025, with top stock picks including $IJM (3336.MY)$, $GAMUDA (5398.MY)$, and $MCEMENT (3794.MY)$.

Consumer Sector: Although the RON95 subsidy will be rationalized by mid-2025, 85% of Malaysians will still receive some form of support. Increased income, favorable domestic economic conditions, and a robust tourism sector are expected to drive strong consumer demand. Notably, the minimum wage will rise from RM1,500 to RM1,700 starting February 1, 2025, and civil servant wage increases will support income growth next year. Additionally, the minimum Sumbangan Tunai Rahmah (STR) cash assistance payment will increase by nearly 24% to RM4,600. MIDF Research forecasts a 5.9% growth in private consumption for 2025, with stocks like $PADINI (7052.MY)$, $AEON (6599.MY)$, and $F&N (3689.MY)$ poised to benefit.

Aviation & Gaming Sector: With a RM550 million allocation to promote Visit Malaysia Year 2026, this sector is set to benefit from the largest tourism budget in history. Maybank analysts believe that aviation and gaming stocks will gain, particularly $AAX (5238.MY)$, which is expected to be a significant beneficiary as 100% of its passengers are international travelers. $CAPITALA (5099.MY)$ and $GENM (4715.MY)$ are considered minor beneficiaries.

Property Sector: The government plans to introduce special incentives for the Johor-Singapore Economic Corridor by year-end, aimed at boosting trade and economic ties between Malaysia and Singapore, which could spike interest in Johor real estate. Additionally, RM900 million is allocated to implement 48 People's Housing Projects (PRR) and 14 Rumah Mesra Rakyat initiatives, with 30 PPR projects slated for completion by the end of 2025. The "Step Up Financing Scheme" under SJKP will provide a government guarantee of up to MYR5 billion to assist young people in purchasing their first homes. APEX Securities favors stocks such as $MAHSING (8583.MY)$, $MATRIX (5236.MY)$, $LAGENDA (7179.MY)$, $SKYWLD (5315.MY)$, with MIDF also positive on $SKYWLD (5315.MY)$, and Maybank favoring $SKYWLD (5315.MY)$.

Renewable Energy Sector: The government is committed to an energy transition, providing increased autonomy and long-term support. Over MYR300 million will be allocated to the National Energy Transition Facilitation Fund in 2025, up from MYR100 million this year. The Net Energy Metering (NEM) program is extended until June 30, 2025, to encourage solar PV installations, and the Green Technology Financing Scheme (GTFS) 5.0 will provide funding of MYR1 billion until 2026. APEX Securities highlights solar EPCC players such as $SAMAIDEN (0223.MY)$, $SAMAIDEN (0223.MY)$, $PEKAT (0233.MY)$, and $PEKAT (0233.MY)$ as beneficiaries.

Here's a partial overview of the top stock picks for Budget 2025 as highlighted by MIDF Research, Maybank, and APEX Securities: