Prime Minister Datuk Seri Anwar Ibrahim announced a cabinet reshuffle comprising five new Ministers and several re-designations.
CGSCIMB believes the appointment of EPF CEO Datuk Seri Amir Hamzah to share Finance, recall of technocrats and creation of Energy Transition and Digital Ministries are positive and are constructive on equities coming off a historically cheap currency and low valuations.
CGSCIMB’s end-2024F KLCI target is 1,755 pts.
Cabinet changes
On 12 Dec, the Prime Minister’s appointments and several reallocations within his cabinet comes approximately one year after he took over the leadership of the country. EPF CEO Amir Hamzah, who has held several leadership roles within the Petronas stable and was CEO of Tenaga, was appointed as the Finance Minister II and will now share Finance with the PM, among others.
Neutral to positive: should help policy continuity and execution
CGSCIMB, in its Strategy Flash Note today (Dec 13), said a key catalyst is that there is now policy clarity and continuity.
The Ekonomi Madani announced in July provided high-level insights into the PM’s policy framework, with further granularity from the National Energy Transition Roadmap (NETR), New Industrial Masterplan (NIMP) 2030 and mid-term review of 12MP.
In addition, the 2024 budget announcement in October was a sign of continuity and follow through of these statements. The Government is projecting RM90bn in development expenditure in 2024F and 2025F (on top of RM97bn this year), substantially higher than the RM50bn-55bn spent annually just prior to the Covid-19 pandemic.
Yet, the overall fiscal balance is being consolidated from an estimated deficit of 5% of GDP in 2023 to 3.5% by 2025F, helped by a move to targeted subsidies.
Project implementation, however, has been slow with several awards being delayed.
On the other hand, CGSCIMB thinks progress in moving to a targeted subsidy regime has been good.
They see the cabinet reshuffle as potentially improving execution, which according to the PM has mainly focused on the Economy, Health and Education.
In particular, the appointment of a Finance Minister II, creation of Energy Transition and Digital Ministries and bringing in technocrats who have performed well in the past are worth noting.
Three tailwinds into 2024
Amid valuations that are down to historical lows, CGCIMB sees three tailwinds providing a strong comeback for Malaysian equities in 2024F: 1) policy momentum through sizeable development and project spending, yet consolidating the fiscal balance; 2) a potential reversal in the strong US dollar trend; and 3) the elusive double-digit growth in earnings.
CGSCIMB recommends being heavily weighted on the domestic driven sectors and themes and remain Overweight on Construction, Real Estate, Banks, Telecoms, Utilities, Conglomerates and Healthcare.
