Through the pandemic, stimulus packages were, Prihatin packages totalling RM260 billion, the RM35bn Economic Recovery Plan, an RM10bn additional stimulus, the RM15bn PERMAI package, an RM20bn PEMERKASA package announced in March, MYR40bn PEMERKASA Plus package; and an RM150bn PEMULIH package. Headline total stimulus is RM530bn (38% of
GDP) but the direct fiscal injection was just MYR83bn.
Budget 2023 continued expansionary fiscal policy ahead of general elections, with a record RM372b expenditure,
announced. The Government expects firmer real GDP growth of between +6.5% and +7.0% in 2022, slowing to 4.0% in 2023. The 2023 budget deficit is expected to decline modestly, to 5.5% (2022: 5.8%; 2020-2021 average is 6.3%). While targeted subsidies and carbon tax were mentioned, no related timelines were forthcoming – the return of GST was not mentioned for now but could be implied by the upcoming Fiscal Responsibility Bill / Medium Term Revenue Strategy. Underlying assumptions for commodity prices in 2023 are USD90/bbl for crude oil (2022: USD100/bbl) and a lower CPO price of MYR4,300/tonne (2022: MYR5,000/tonne). Statutory debt/GDP ratio is forecast to reach 63% by end-2023, vs. ceiling of 65% (June 2022: 57.8%).
OPR cuts in 2020 totalled 125bps, taking it to a record low of 1.75%. In a surprise move, BNM unexpectedly raised the OPR by +25bps in May, well ahead of consensus 4Q22 expectation, and raised again in July and Sept, by +25bps each; Maybank IB expects another +25bps hike in Nov 2022, to 2.75%, and a +25bps hike next year, taking OPR back to the pre-COVID level of 3.0% by end-1Q23.
BNM expects 2022 headline inflation rate to be between +2.2% and +3.2%. The key assumptions underpinning this headline inflation rate forecast are that fuel price subsidy that set the RON95 and diesel price at MYR2.05/litre and MYR2.15/litre since Feb 2021 (vs. est. market price of c.MYR4/litre) remain in place this year.
However, the 2023 CPI forecast of a higher +4.0% (2022E: +3.3%) imputes a more targeted subsidy regime.
Re key market-impacting developments, i) Budget 2023 contained additional albeit incremental tax incentives for both the property sector (stamp duty exemptions) and the auto sector (to speed up EV adoption, the roll-out of national charging infrastructure) ii) blanket loan moratorium (since July 2021, retail borrowers) has expired, with NPLs upswing muted thus far; and iii) all domestic economic sectors are now operating at 100% (subject to continuing SOPs) while inter-state travel has been allowed since Oct 2021; international border reopened April 1st, with Covid testing/quarantine requirements now eliminated.
In this sense, Maybank IB sector positioning, given the continuing uncertainties relating to the pace of economic recovery, policy/political risks and global interest rate adjustments, are balanced via a mix of value and growth picks + continuing yield focus.
Some of the prefered mid-cap financials (HLBK, HLFG. RHB, AMMB, ABMB, Allianz); ii) auto (BAuto, Sime, MBM); iii) construction (Gamuda); iv) renewables plays (Solarvest, Cypark); v) externally-driven earnings/exporters such as tech sector Inari (leveraging 5G deployment), ViTrox (automated optical inspection) and Frontken; and vi) large-cap oil & gas Dialog & Yinson (positioning, management), as well as Hibiscus (direct oil price proxy), and PChem (petrochem). More selectively, KLK and Ta Ann (plantations) Telekom and Axiata telco), CTOS (software), Sime Property (property), MAHB and AAGB (aviation), Gent(M) (gaming), Mr D.I.Y, Farm Fresh, BFood, Heineken and AEON (retail/consumer), KPJ (hospitals), Gas (M) and MFCB (utilities) and Sentral and AXIS re REITs.
Top SELLs: Consumer/Retail (Nestle, QL), Gloves (TopGlove, Hartalega, Kossan) and SMID O&G (SAPE). Also Lotte Chemical,
ECWI, UEMS
