KUALA LUMPUR: Consumer sector would improve this year underpinned by rejuvenation of consumer sentiment, ringgit’s appreciation and improved tourist arrivals.
Hong Leong Investment Bank (HLIB) in a research note released today, opined consumer spending would likely be stimulated with 1Malaysia People’s Aid (BR1M) payments, tax cuts and other cash handouts in 2018.
“Currently, consumer stocks are trading at historical high with the KL Consumer Index trading at 32 times price earnings ratio (P/E) or two standard deviations above its five-year average P/E of 23.5 times.”
Consumer sentiment rebounded slightly last year as it continued to normalise after the implementation of goods and services tax (GST) in April 2015.
The research house noted that the Budget 2018 contains various measures aimed at boosting consumer spending.
In total, about RM13.1 billion worth of BR1M payments, lower income tax, increase in senior and disabled people (OKU) allowance and civil servants, government pensioners and FELDA settler handouts is expected to spur consumer spending.
HLIB expects ringgit to average stronger this year between RM4.00 and RM4.20 against US$1.00, attributed to firmer oil prices, capital inflows and Bank Negara Malaysia’s foreign exchange measures.
The National Wages of Consultative Council has also indicated there is possibility of minimum wage hike in 2018.
Hence, HLIB has maintained its ‘Neutral’ call on the consumer sector for 2018.