MILD TURNAROUND: Investors react positively to Najib's game plan to boost economic growth
BURSA Malaysia had a mild turnaround in the last one hour of trade yesterday as market players bet that Malaysia will be the biggest winner from the 2014 Budget.
The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI), which eased by more than five points for most parts of the trading day, drew some comfort from Prime Minister Datuk Seri Najib Razak's remedy for the country.
The key index erased almost 80 per cent of its intra-day loss to close at 1817.50 points, a mere 1.36 points off Thursday's close.
On Thursday, the FBM KLCI had its best closing - at 1,818.93 points.
"It is not too bad (considering that Thursday's close is a record close)... we have a faster growing economy and a plan of action to bring down the budget deficit... the markets should be pleased," said Edmund Tham, the head of research at Mercury Securities.
The benchmark index was also helped by the oil and gas (O&G) sector - the lynchpin of the country's economy.
The sector's total weightage in the index is 11.1 per cent, while the financial sector has 33 per cent weightage.
The financial sector has benefited from Malaysia's growing capital market, which is now valued at US$816 billion (RM2.55 trillion), or equivalent to two-and-a-half times the country's current gross domestic product.
The prime minister's plans to grow the country's economy at a briskier pace were well-received by the stock market yesterday.
Consumer stocks such as Carlsberg Brewery Bhd, Guiness Anchor Bhd and British American Tobacco Malaysia, were among the top gainers, while Bursa Malaysia Bhd added 15 sen to close at RM8.15 as investors bet that a briskier economy next year will add some steel for the bourse to advance further.
The economy is poised to grow by between 5.0 and 5.5 per cent next year, much faster than the 4.5 to 5.0 per cent expected this year, Najib said.
Currency traders chased after the ringgit and their pent-up demand for the currency saw it close at RM3.156 against the US dollar yesterday.
A month ago, the ringgit was trading at RM3.22 against the US dollar.
"It's a fair budget," SJ Securities Sdn Bhd deputy managing director Peter Lim told Business Times.
He said on the surface, the budget is good for Malaysia, moving forward.
Other sectors that had their heads-up after the budget were logistics, aviation, construction and Internet providers.
Drawing comfort from Najib's economic game plan, investors bet that the implementation of the consumption-skewed goods and service tax starting April 1 2015, along a cut in personal income tax, should put Malaysia on the starting blocks to restructure its finances.
"I have not reviewed the budget in detail, but on the surface, there are no real losers in this budget," said SJ Securities' Lim.
His views were echoed by property developer Datuk Chee Hong Leong.
Commenting on the new tax regime for the property sector, Chee said he was confident developers will come up with the right mix of products to maintain sales ratio.
Foreigners are now only allowed to buy properties worth RM1 million or more. Previously, the minimum cap was RM500,000.
Chee said most foreigners, even before the minimum cap, were buying properties priced at nearly RM1 million or more.
An increase in the real property gains tax (RPGT) and the move to stop developers from implementing projects with Developer Interest Bearing Scheme are measures needed currently to prevent the nucleus of property and financial bubbles from taking shape, he said.
As such, the RPGT rate has been upped to 30 per cent on gains from properties disposed of within the holding period of up to three years, while for disposals within the holding period of four and five years, the rates were increased to 20 per cent and 15 per cent, respectively.
For disposals made in the sixth and subsequent years, Chee said, no RPGT will be imposed on citizens but companies are taxed at five per cent.