REGARDLESS if the 15th General Election (GE15) is held prior or after to the tabling of Budget 2023, expect next year’s budget to be an election budget with wide ranging measures that are appealing to civil servants, farmers, rural folks, low and middle-income groups, youths and families.
Its appeal is expected to transcend even political affiliation in such instances as what transpired in Budget 2018 when even opposition held states got allocation for building airports and cancellation of tolls, according to TA Securities Research.
“Of course, there will be a limitation to announce stringent measures if Budget 2023 is held before GE15 as the opposition parties can harp on them to obtain political mileage and voters show their unhappiness through the ballot boxes,” opined head of research Kaladher Govindan in a market strategy note.
“Despite this, Budget 2023 is not expected to compromise on fiscal discipline as some of the measures can be funded through public-private partnership, revenue enhancement through new tax measures – ie the global minimum tax of 15% on multinational companies and possible re-introduction of GST – and cost reduction via targeted subsidy measures.”
As such, TA Securities Research said a pre-budget rally is possible in anticipation of a populist budget.
“Besides, concerns about US monetary tightening could also ease prior to the event due to possible weakness in core inflation because of the US Federal Reserve’s aggressive tightening measures and improvement in supply chain constraints,” projected the research house.
“Return of foreign interest could also be on the cards due to cheap ringgit and positioning in anticipation of a pre-election rally.”
As it is possible for Malaysia to go through a softer economic growth next year than an outright recession even if the US economy contracts, TA Securities Research advised investors to hold a diversified portfolio than finding solace in mostly defensive picks that will provide lower returns in an inflationary environment.
“It is undisputed that one of the key reasons for the FBM KLCI’s valuation discount to regional peers was domestic political uncertainty and lack of strategic direction,” opined the research house.
“While the outcome of GE15 will largely determine the ability to close or widen this gap, we are of the opinion that lessons learned in the last four years will provide political parties the maturity to cooperate and form a strong and stable government to rule.”
In this regard, TA Securities Research expects the implementation of anti-hopping law as another plus point to minimise political uncertainties unless an entire party or parties hop out from a ruling alliance.
“Thus, the new government is expected to kick start large infra projects to drive the domestic economy amid anticipated slowdown in 2023,” reckoned the research house.
“Apart from the progress of MRT3 (Mass Rapid Transit Line 3) project, there is potential for revival of the Kuala Lumpur-Singapore High Speed Rail (HSR) and launching of Smart Tunnel 2.0 for flood mitigation project, Light Rail Transit (LRT) for Johor Bahru and Pan Borneo Phase 2.” – Sept 2, 2022
