Written by Joseph Chin
Saturday, 24 October 2009 07:49
KUALA LUMPUR: Investors' sentiment in equities next week, starting Oct 26, could be weighed down by the losses on Wall Street, which saw the Dow Jones Industrial Average finish below 10,000 for the second time this week.
The Dow Jones industrial average fell 109.13 points, or 1.08 percent, to 9,972.18, marking its second finish this week below the 10,000 mark. The Standard & Poor's 500 Index dropped 13.31 points, or 1.22 percent, to 1,079.60.
However, the positive outlook for the Malaysian economy next year and measures to further shore up the economy under the Budget 2010 proposals, would provide support for the market.
RAM Holdings said the smaller budget has strengthened its view that the planned 13.7% cut in operating expenses, or an equivalent of 3.2% of GDP, has improved the country's fiscal space.
"Although the government's projected GDP growth of 2% to 3% for next year is lower than market consensus and also RAM's forecast of 4.9%, we welcome the focus on reining in the country's fiscal deficit in 2010," it said.
AmResearch said from an equity-market perspective, Budget 2010 is again a non-event given the lack of multiplier effects on corporate earnings near term and muted consensus expectations on potential catalytic policy pronouncements.
Sin taxes on gaming, alcohol and tobacco were conspicuously absent, it said.
Stocks to watch next week include banks, credit card issuers including Aeon Credit, property companies, telcos, including broadband and WiMax players like Green Packet, infrastrcuture companies like IJM and Gamuda.
Maxis is scheduled to launch its prospectus on Wednesday and it is expected to raise nearly RM10.2 billion for the listing exercise of its Malaysian operations. However, pricing the shares above RM5.20 may not attract strong interest.
Tabung Haji had already stated it would only be interested if the offer price doesn’t exceed RM5.20 a share. The pilgrimage fund's chief investment officer Mohammed Noor Abdul Rahman said: “We cannot go beyond that price.”
Meanwhile, Datuk Seri Abdul Wahid Omar, who is president and CEO of MALAYAN BANKING BHD [] and chairman of the Association of Banks in Malaysia said there are two aspects in the Budget 2010 proposals that will affect the financial-services industry.
Firstly, the introduction of a RM50 a year service tax for credit and charge cards. Secondly, the reintroduction of a real property gains tax, albeit at a much lower rate of 5%.
Whilst this may reduce some speculative elements in the property market, it will also result in lower growth in housing/property loans for the banks, said Wahid.
But AmResearch said the sentiment-driven weakness in property equities presents a buying opportunity. To broaden tax revenue, the government has imposed a flat real property gains tax of 5% on residual gains, with certain exemptions.
"We do not think this measure will derail demand, as impact on property price discovery in a rising market would be negligible. Furthermore, recent share-price weakness in property equities suggest that real property gains tax (RPGT) has already been priced-in," it added.
Telcos including companies providing broadband services including Green Packet's unit, Packet One, should attract interest after the government proposed individual taxpayers be given tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012.
Telekom Malaysia should attract interest also as the government speeds up implementation of high-speed broadband at total cost of RM11.3 billion, of which RM2.4 billion is from government and RM8.9 billion from Telekom Malaysia.
Infrastructure companies including IJM and Gamuda would attract interest as the government allocates RM9 billion for infrastructure.
Of the RM9 billion, the Budget 2010 proposals said RM4.7 billion will be for road, bridge, water and sewerage projects and RM900 million for railways.