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KUALA LUMPUR: The Budget 2018 proposals are positive, especially for the consumer, construction and tourism sectors, says Maybank Investment Bank Research. It said on Monday it retained its earnings forecasts, sector weights and stock calls. "We also maintain our end-2017 KLCI target of 1,800 and introduce end-2018 target of 1,865," it said. Commenting on the Budget 2018, the research house pointed out the government retained its discipline with a lower fiscal deficit target of -2.8% of GDP (2017E: -3.0%). There could be upside to the government’s revenue target (+6.4% on-year), which is based on an average crude oil price assumption of US$52 a barrel. Gross development expenditure is sustained at RM46bil (2017E: RM46bil). 
Official real GDP growth expectation for 2017 has been revised up to 5.2-5.7% range (from 4.3-4.8%; Maybank Research: 5.5%) while the newly introduced 2018 growth target is 5.0-5.5% (Maybank Research: 5.1%).

Measures to sustain consumption growth – a two percentage point cut in individual income tax rate at the lower chargeable income brackets would lift disposable income by an estimated RM1.5bil, special payments to civil servants/pensioners, BR1M sustaining at RM6.8bil - are positive for the consumer sector.

Beneficiaries would be those that offer mass market consumer goods e.g. Nestle, Bison, 7-Eleven, Aeon Credit and even Padini, Old Town and Berjaya Food . The start of construction of ECRL and Kuala Lumpur-Singapore Highspeed Railway in 2018 is positive for construction and building materials. 

The bringing forward of the Klang Valley MRT 3 construction has been flagged earlier; it will provide job replenishment for the construction sector in 2019.
“Higher tourist arrival target of 28 million in 2018 (2016: 26.8 million) will benefit aviation (MAHB, AirAsia , AirAsia X), casinos (Genting Malaysia), F&B (Only World Group), duty-free operat operator (Atlan), among others. Establishment of Pulau Pangkor as a duty free island may benefit YTL REIT and Atlan (presently, it has outlets in duty free islands of Langkawi and Tioman).

Maybank Reseacrh said the Budget 2018’s allocation of RM83.5mil to construct infrastructure for the first phase of Digital Free Trade Zone (DFTZ) in Aeropolis, KLIA, reaffirms the government’s commitment in embracing the digital economy. 

“We believe that MAHB and the airlines will be the beneficiaries in the longer term,” it said. What is new in Budget 2018 is the development of a Special Border Economic Zone in Bukit Kayu Hitam, which the research house believes is part of a larger plan following the Second Finance Minister’s working visit to Thailand in September 2017. “Beneficiary, we believe, will be Atlan which has a duty-free outlet at Bukit Kayu Hitam and 772 acres of land, ripe for development,” said Maybank Research.


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