[Budget 2019] You have to know these WINNERs and LOSERs !!!

It was suppose to be a “national sacrifice” budget, but it turns out be a caring budget to take care the B40 targeted group while more prudent on the government expenditure. Prior to the tabling of Budget 2019 in Parliament last Friday, the markets reacted negatively in anticipation of a painful year ahead.

No more bad news = Good news ???

However, the reality, as it turned out, was not as taxing all because of the surprising RM 30billion special dividend to be given from Petronas. Effectively, this has lessen the need for deeper spending cuts and/or more punitive tax-raising initiatives. Thank you to Petronas, the national hero once again.

Let's have a summary of the potential winners and losers from this Budget 2019:

Carlsberg & Heineken (Positive)

Oversold position prior to Budget 2019 in anticipation of higher sin tax on alcoholic drinks, but it was a non-event last Friday. Potential relief rally for brewers.

BAT (Positive)

Absence of tax hike bodes well for the cigarette company. Potential relief rally.

Opcom (Positive)

Allocation of RM1bn from the government to develop broadband infrastructure in the next five years. Opcom is one of Malaysia's leading fiber optic manufacturer.

MyEG (Positive)

Targeted fuel subsidy to eligible vehicle owners need the help of technologically-ready provider like MyEG.

Mah Sing, LBS Bina, Huayang & Sentoria (Positive)

Lower interest rates, higher financing margin and 100% stamp duty waiver could help the first-time home buyers, and this is good news to affordable home developers.

KPJ Healthcare & IHH (Slight Positive)

Due to the new B40 National Health Protection plan for lower income group.

Genting & GENM (Negative)

Two of the biggest losers from Budget 2019 due to higher casino license fees and gaming duties.

Magnum & BJTOTO (Slight Negative)

Special draws will be reduced by half, but it's a relieve that sin tax was unchanged.

Nestle, F&N Malaysia, Power Root, BJ Food & MSM (Negative)

Due to the new excise duty on sugary drinks. MSM is local sugar refiner.

AirAsia & AAX (Negative)

Starting 1 June 2019, with the rate at RM20 for outbound travellers to ASEAN countries and RM40 to countries other than ASEAN. And, higher fuel price was projected for 2019 and 2020. The abolishment of the RM20,000 p.a. tax cap for Labuan-based companies and to be taxed at 3% flat. Companies like AirAsia and AAX register their aircraft in Labuan.

Sime Darby Prop, SP Setia, Sunway (Negative)

Increase in stamp duty, introduction of RPGT from year 6 onwards and REHDA promised 10% reduction in the prices of new houses.

Sime Darby Plant, Felda, IOI Corp (Negative)

Higher minimum wage will increase the labour cost for planters.

MAHB (Neutral)

Government proposed to set up the world's first Airport REIT. It doesn't affect the profits of MAHB because the only difference is that, once the airport REIT is established, MAHB will no longer pay the user fee to the government, but will instead pay to the new airport REIT.

Disclaimer: This article is not intended, and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments.

Have a good trade ahead !!!

Budget 2019: Economic Highlights and Un-Budgeted Items?

From the recently announced Budget 2019 themed as 'Malaysia Wibawa, Ekonomi Dinamik, Rakyat Sejahtera', it will have 3 focus areas, and 12 main strategies to put the country back as an "Asian Tiger" again (hopefully), as what we enjoyed during 1990s until the Asian financial crisis.

Below is the 3 focus areas:

• 1st : Implement institutional reforms
• 2nd : Ensure people's well-being
• 3rd : Nurture a culture of entrepreneurship

The very first budget announcement from the new government after 60 years of independence caught the eyes of the world, especially economists, to gauge the thinking of the new ruling coalition's future policies. Well, it was considered as an expansionary budget, although facing fiscal constraint, partly due to 1MDB scandal.

Economic Highlights from Budget 2019:

1. Government real debt and liabilities as at end-June 2018 stood at RM1.065 trillion, which is RM350 billion more than the official sum revealed by the previous government
2. Forecasts 2018 GDP growth at 4.8%
3. Forecasts 2019 GDP growth at 4.9%
4. Debt for 2019 expected to reach 51.8% of GDP
5. Total liability in 2019 expected to declines to 73.5%
6. Budget deficit for 2018 revised to 3.7% vs 2.8% previously (after taking into the 'real' debt figures)
7. However, the fiscal deficit is projected to narrow to 3.4% of GDP in 2019

Huh? What is the so called "un-budgeted items" by previous goverment?

According to the Budget 2019 speech, the increase in fiscal deficit arises after taking into account previously un-budgeted items such as below:

• RM1.0bn interest servicing cost for 1MDB debts,
• RM1.3bn in compensation for the acquisition of Eastern Dispersal Link in Johor which was announced last year,
• RM1.0bn for Prasarana,
• RM1.4bn for Ministry of Transport rail projects, and
• paying back some GST refunds of RM3.9bn.
  

Well, well, well... It's good that the new government is transparent about our financial health. However, this would not be good in the eyes of rating agencies, which may potentially downgrading our credit rating later. What do you think?

"Although the 2018-2019 budget deficits were adjusted higher – derailing theoriginal course of fiscal consolidation – we are confident that international ratingagencies will look past this as a one-off event." ~ RHB Research

"Over the medium term, the deficit is seen reducing to the region of 2%, though the government did not mention the exact time period. As such, we do not foresee any changes in Malaysia’s sovereign credit rating." ~ TA Securities

Below is the info-pictures designed by Finance Malaysia team to highlights some of the key announcements:

Next we will blog about the possible winners and losers for share investors. Stay tuned !!!