Consumer spending sentiment is expected to stay positive going into 2023, supported by the reopening of the economy, financial assistance, stable job market and healthy M40 household balance sheets, said Kenanga Research.
In a note, the research firm believes that consumer spending will also be driven by the return of shoppers, commuters, the office crowd and international tourists, as well as financial assistance to the low-income group and subsidies for fuels, electricity and selected food items to keep the cost of living in check.
“The subsidies will help relieve some inflationary pressure.
“We project inflation to start tapering from the second half of 2023 (2H2023), bringing the full-year headline inflation stabilising at 2.5 per cent based on our in-house forecast,” said Kenanga Research.
Similarly, the research firm expects local retail sales to stay robust going into 2023 following an almost year-on-year doubling in the third quarter of 2022 (3Q2022) according to Retail Group Malaysia.
It foresees the consumer sentiment to stay positive going into 2023, noting that the Malaysian Institute Of Economic Research’s Consumer Sentiment Index jumped by 12.4 points to 98.4 in the third quarter of 2022 (3Q2022), bringing it closer to breaching the optimism threshold of 100 points.
Despite the uncertain domestic and global economic outlook, as well as the squeeze brought about by the sustained elevated inflation and rising interest rates, the overall sentiment improved in 3Q2022 as financial expectations steadied, resulting in an increase in spending, it said.
As such, Kenanga Research has maintained its “overweight” call on the consumer sector, naming AEON CO. (M) Bhd and Mynews Holdings Bhd as its top picks.
“We like AEON as it benefits from the return of shoppers, the office crowd and international tourists, as well as its customer base that is skewed towards the M40 group and its digital transformation.
“Meanwhile, we like Mynews in view of the under-penetrated convenience store market in Malaysia, its return to the growth path in terms of outlet expansion post-pandemic, the turnaround at its Food Production Centre and its differentiation from competitors through Korean products,” it added.