Unlocking Potential: The Impact of Malaysia's 2025 Budget on the Stock Market!

Malaysia’s Budget 2025, unveiled on October 18, is the largest in the nation’s history, with a total allocation of RM421 billion. The budget emphasizes fiscal consolidation, economic growth, and social welfare, aiming to reduce the fiscal deficit from 4.3% in 2024 to 3.8% in 2025.

With significant funding directed toward infrastructure, green technology, and SME support, the budget carries important implications for the stock market, with varying impacts across sectors.

1. Construction and Infrastructure: RM100 billion has been allocated to large-scale infrastructure projects such as road construction, public transportation, and affordable housing development. This is expected to generate strong demand in the construction sector, benefiting companies involved in these projects. Investors could see construction stocks rising in the wake of this government investment, as the budget promises significant development opportunities for the country’s infrastructure.

2. Green Economy and Renewable Energy: The government’s commitment to a greener economy, with RM5 billion allocated for renewable energy projects, is set to accelerate growth in green technology sectors. The focus on solar energy, electric vehicle (EV) development, and sustainability initiatives may boost stocks in companies tied to green innovation. The increasing global emphasis on environmental sustainability aligns well with these policies, making the sector a promising area for long-term growth.

3. Consumer Goods and SME Support: The RM10 billion dedicated to SMEs, coupled with cash handouts and tax incentives, is designed to stimulate domestic consumption and support small businesses. As SMEs play a crucial role in Malaysia’s economy, the government’s support for digitalization and expansion initiatives will likely bolster the tech and retail sectors. This financial aid could drive an uptick in consumer spending, positively affecting consumer goods stocks

4. Mixed Impact from Tax Adjustments: The budget introduces higher taxes on luxury goods and a windfall tax on certain sectors, including palm oil and oil & gas. While this may generate additional revenue for the government, it poses a risk to these industries, leading to potential downward pressure on their stock performance. The increased service tax from 6% to 8% will also impact the consumer services sector, although the broader market may remain resilient if demand remains steady in other areas.

>>Positive Sectors: Construction, infrastructure, green energy, and consumer goods sectors are expected to benefit from the budget’s provisions. With substantial government spending on public infrastructure and green projects, investors are optimistic about the long-term growth prospects of these industries.

>>Cautious Outlook: On the other hand, sectors like palm oil, luxury goods, and oil & gas face challenges due to increased taxation. Higher costs imposed on luxury items, coupled with the windfall tax on high-profit sectors, could dampen investor confidence in these industries. Additionally, the service tax hike may weigh on consumer sentiment, especially in higher-priced goods and services.

In a conclusion: Investors are expected to monitor the implementation of these fiscal policies and their broader effects on the economy. With the budget aiming to strike a balance between stimulating growth and fiscal discipline, market volatility could persist, particularly in response to global economic uncertainties and regional challenges.

As Malaysia navigates through this economic transition, sectors aligned with government spending, such as infrastructure and green energy, are likely to see steady performance, while sectors subject to higher taxation may face headwinds in the near term.

Attached are market reviews and outlooks for US and MY market, feel free to check it out.

The U.S. stock market continued its positive momentum, boosted by the Federal Reserve signaling a potential pause in interest rate hikes, and favorable economic data suggesting easing inflation. Tech stocks led the rally, with companies like Nvidia driving gains ahead of upcoming earnings. Energy stocks declined amid falling oil prices, further reducing inflationary pressures.

🇲🇾Key events for the week:
– 23 Oct - US Crude Oil Inventories, 24 Oct - US Initial Jobless Claims
– Earnings - Coca-Cola, Boeing, Tesla, American Airlines

🇲🇾MY Stock Market Review (14 – 18 October 2024)

The Malaysian stock market remained under pressure, driven by concerns over global economic slowdown and geopolitical risks. Foreign outflows continued to affect sentiment, while the cautious outlook on regional markets added to the decline. Additionally, weak commodity prices and soft regional performances weighed on the index, which struggled to gain upward momentum amidst global uncertainties

🇲🇾Key events for the week:
– 21 Oct - MY GDP (YoY), 22 Oct - MY FX Reserves USD

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