MALAYSIAN consumers are expected to do fine next year but they may not look like the force they were previously, according to AllianceDBS Research.
Household spending is expected to slow down on the back of weaker consumer sentiment, AllianceDBS analyst Cheah King Yoong, who is neutral on the sector, said in a Dec 9 note.
Malaysian Institute of Economic Research’s most recent consumer sentiment index (CSI) for 3Q19 (as of Sept 30) contracted nine points quarter-on-quarter to 84 points.
This represented a seven-quarter low since 4Q17 and is below the 100-point threshold level of optimism. “This implies that consumers are increasingly cautious about their spending,” said Cheah.
“Moving into 2020, we believe that consumer spending will stay resilient but growth will be subdued, in line with the weak CSI,” he added.
Market observers including Bank Islam Bhd chief economist Mohd Afzanizam Abdul Rashid believe consumer spending growth may edge up to 7.3% this year but drop to 6.5% next year.
Cheah also flagged the performance of consumer stocks under AllianceDBS’ coverage, which delivered “unexciting” 3QCY19 results.
“We do not see much room for significant earnings upgrades going forward. As a whole, we only expect a modest CY20 earnings growth of 3% for the consumer stocks under our coverage, although it is above average – 5% earnings growth registered in the past three years,” he said.
But Cheah believes there might be “some positive” catalysts to boost consumption growth next year. They are: perks in Budget 2020, recovery of crude palm oil prices and Visit Malaysia Year 2020. But these would not move the needle substantially, he added.
