KUALA LUMPUR: Bursa Malaysia is expected to see some weakness the week ahead as investors react to the introduction of dividend tax and increase in labour costs squeezing profit margins for companies.
2025 Budget introduced a 2 per cent tax on dividends exceeding RM100,000, from the year 2025.
CIMB Securities in its note said the dividend tax may cause some investors to reconsider investments in high dividend-yielding stocks, while mandatory Employee Provident Fund (EPF) contributions could result in higher-than-expected labour costs for sectors that employ large numbers of foreign workers, posing corporate earnings risks.
Construction, property, healthcare, and gaming sectors are likely to benefit from the Budget 2025 measures.
While automotive, plantation, technology, and rubber glove sectors may be negatively impacted by the higher minimum wage, introduction of multi-tier foreign worker levy and mandatory EPF contributions for foreign workers.
"Although Budget 2025 raises cash handouts and the minimum wage, these measures may not be significant enough to materially boost corporate earnings or offset the increased labour costs and higher sales and services tax," it said in its report.
Hong Leong Investment Bank (HLIB) Research said 2025 Budget's income boosting measures alongside existing measures such as the flexible EPF Account 3 and impending civil servants pay rise, should be positive for mass market consumer retail and national auto marques.
Income boosting measures includehigher Sumbangan Tunai Rahmah cash handouts by 30 per cent to RM13 billion; minimum wage hike by 13 per cent to RM1,700; progressive wage policy in 2025; starting salary guidelines for all sectors and EPF contribution for non-citizen workers.
On the flipside, higher wages – not to mention Multi-tier levy mechanism on foreign workers – would impact labour intensive sectors such as construction, electronic manufacturing services, gloves and plantation.
HLIB Research added that sustained elevated development expenditure at RM86 billion bodes well for construction which is already thriving from data centre contract flows, while tax relief for first homebuyers (RM7k and RM5k) is positive for property developers, especially those focused on the affordable-to-mid range housing segment, such as Mah Sing Group Bhd and Matrix Concepts Holdings Bhd.
CIMB Securities maintained its FTSE BUrsa Malaysia KLCI target of 1,732 points for 2024. Its top sector picks are construction and healthcare, as beneficiaries of the 2025 Budget.
Hong Leong Investment Bank (HLIB) Research said the 2025 Budget is a mixed bag for the market, with the the broad positives from responsible fiscal consolidation and income boosters likely to counterbalance higher labour cost and unexpected dividend tax dent.
"We maintain our end-2024 KLCI target at 1,700 (15.5 times CY24 price to earnings (PE) ratio). In our view, the market could regain traction in Nov-Dec when the Fed administers further cuts, alongside the traditional year-end window dressing effect," it said in its note.