KUALA LUMPUR: Investors are likely to ignore the impending stamp duty increase on Bursa Malaysia and continue to place their money in the local exchange because of its attractive price-to-earnings (P/E) ratio.
Juwai IQI Global chief economist Shan Saeed said that while investors would be cautious about the stamp duty being implemented, the way forward is to bring all stakeholders on board and develop an engagement strategy that can lower the cost of trade, which will have an impact on the market.
"Whenever stamp duty is introduced to the market, the cost increases.
"But investors do not have the choice, and they would continue to park funds in emerging markets to take leverage from economic confidence, strong domestic demand and growth trajectory of the market.
"Investors and Bursa Malaysia have to find an amicable solution to resolve this issue," Shan told The New Straits Times.
He said the KLCI level would remain between 1,600 and 1,700, with plantation, technology and gloves sectors remaining attractive for sophisticated and smart global investors.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the stamp duty increase would benefit the government coffers because it is a component of direct taxes and accounts for approximately 2 per cent of total government revenue.
He said while the move can be seen raising the cost of doing business, it does help in the government effort to shore up its revenue base, especially when the government is expected to keep their expansionary stand on fiscal policy.
He said this could help sustain the government's sovereign rating as the government exercises its rights to tax.
"Perhaps, this could be credit-positive, leading to stability in the government's sovereign rating.
"At least, the government is seen to be in control of their revenue, especially when the fiscal deficits are expected to remain high in the near term.
"In a nutshell, we may need to look at the other side of the coin to make fair inference on the latest move," he told NST.
To recap, the recently-unveiled Budget 2022 proposed increasing the stamp duty rate on contract notes from 0.1 per cent to 0.15 per cent effective January 1, 2022, while removing the cap of RM200 per contract.
Hong Leong Investment Bank Bhd (HLIB Research) analyst Jeremy Goh said larger traders, including domestic institutions and foreign investors, would be hit harder, impacting over 60 per cent of Bursa Malaysia Bhd's demographics.
"The stamp duty hike would also make Bursa Malaysia the most expensive exchange to trade within Asean," he said in a research report today.
"The quantum of the hike is also higher for Bursa Malaysia and is further exacerbated by the cap removal.
"Taking these into consideration, we expect Bursa Malaysia's 2022 average daily value (ADV) trading to chalk in at RM2.48 billion, representing about 30 per cent year-on-year decline but still a tad above the pre-Covid highs of RM2.3 billion to RM2.4 billion in 2017 and 2018," he said.
Minority Shareholders Watch Group chief executive officer Devanesan Evanson said some drop in the (ADV) could be expected, though the percentage drop may vary due to the ecosystem of each market and its peculiarities.
"The impact on listed companies will not be much as they do not trade in shares generally except for those public listed companies (PLC) with business strategies that involve investing in other PLCs and the those indulging in share buy-backs," he said.
Affin Hwang Asset Management senior portfolio manager David Loh said although the new rate will only take place next year, investors are already starting to see the impact as they begin to unwind big trading positions ahead.
He said the local market could become quieter or more muted as fewer speculative or tactical trades are being carried out.