At the headline level, MIDF expects higher expenditures and bigger revenue from its earlier projections… The total spending in Budget 2023 is now proposed at RM386.1 billion or 3.7% higher than the earlier proposal. Moreover, the amount allocated for gross development expenditure of RM97.0b is 2.1% higher.
Hence, the nation’s sovereign risk would not likely be compromised despite the further accumulation of fiscal debt. Overall, no material negative surprises in Budget 2023 at its headline level. At the granular level, the proposed capital gains tax on the disposal of non-listed shares may attract more listings in the local equity bourse. Moreover, the Securities Commission would facilitate more secondary markets for private market instruments to improve liquidity and enable better price discovery. Additionally, the issuance of dual-class shares would be permitted in order to encourage the listings of local high-growth technology companies. MIDF says it reckons these announcements to act as catalysts that would help to reinvigorate the local capital market. It seems the knee-jerk reaction of the local equity market to Budget 2023 was rather positive as the FBM KLCI recovered from an intraday low of 1,448 points midday to close at 1,457 points on Friday.
As for the market outlook, MIDF is of view the equity market to remain edgy in the short term. Due to the prevalent uneasiness over the possible postponement in the Fed pause thus greater downward pressure on output growth, hence a higher likelihood of recession, it posits the risk asset markets and equity in particular is tilting sideways or even down in the short term.
However, in the medium term, it expects the risk-on mode to return after the anticipated Fed pause. Empirically, the
the intervening period between the end of US Fed rate hikes and the impending recession could prove attractive for equity
market, kind of a “last hurrah”, principally due to two factors, unwinding or subsiding pressure on equity required return (as the upside risk diminishes) with the end of the tightening cycle, and in the meantime, corporate earnings are likely to remain buoyant as the supposed recession is yet to manifest and is possibly one (or more) year away
The research house believes that the consumer sector (particularly consumer stapled) and construction sectors are the obvious winners of Budget 2023, it opines that it is worthwhile for investors to look at stocks in these sectors. Besides this, the continued focus on technology and the efforts to attract FDIs in the E&E sector may benefit listed semiconductor companies. Bursa Malaysia may also be a beneficiary of the possibility of the domestic capital market being reinvigorated by measures announced.
