INVE$T | Market Sentiments | 05 November 2021
According to head of regional equity research Anand Pathmakanthan, Maybank Kim Eng has applauded the government’s decision to give full exemption of import duty, excise duty, as well as sales tax for electric vehicles (EVs) as it seeks to support the local EV industry. The government initiatives will kick start the infrastructure investment by various parties for the EV space. Malaysia is a bit slow to address the EV issue when the rest of ASEAN countries have got so many policies in place. This initiative would be good to the economy, would be good for stocks in this sector as well. This was in reference to Finance Minister Tengku Datuk Seri Zafrul’s who in his Budget 2022 presentation in Parliament on Friday (Oct 29), said a 100% road tax exemption will also be given to EVs. And that the government sees the potential of EV as it is energy efficient and that it also helps to reduce air pollution. The government is also giving tax income exemption for individuals of up to RM2,500 on the cost of purchase, installation, rental, hire purchase as well as subscription fees for EV charging facilities. The government will extend the 100% sales tax exemption for completely knocked down (CKD) passenger vehicles and a 50% discount for completely built-up (CBU) cars, including multi-purpose vehicles (MPVs) and sports utility vehicles (SUVs) for six months until June 30 next year. In view of this, Maybank Investment has maintained its positive outlook on the automotive sector. The extended sales tax exemption announcement is welcoming but the timing of the announcement is relatively off. This would affect vehicle sales in Nov-Dec 2021, as prospective buyers will not be rushed to place orders before the earlier deadline of Dec 31, 2021.
Return of GST not only way to tackle revenue issue – Tricor’s Dr Veerinderjeet Singh
According to Tricor Malaysia chairman Dr Veerinderjeet Singh, bringing back the goods and services tax (GST) is not the only answer to Malaysia’s revenue issue but is only one of many that can be introduced. Speaking at the Malaysian Economic Association’s (MEA) 2022 Post-Budget Dialogue, he said that his suggestion for the way forward is to examine the existing sales and services tax (SST) and expand it a little bit – but this year might not be the right time – to cover a lot more services over time and integrate it to have the attributes of GST. In other words, there is some kind of harmonisation that has to occur but it might take three years. He reminded participants that there was a particular issue with profiteering in the previous implementation of GST. He said the strength of the consumption tax is built into its multistage mechanism, which forces traders to come onboard, enhancing the compliance culture as well as marking an audit trail to the tax invoice. That is the strength on which we can actually build better compliance and therefore the revenue collected can be more secure as prediction will be with a little bit more accuracy. He also cleared the misconception that GST produces more revenue than SST. He said it is the preferred tax regime across the world because it is more robust as the multistage tax can help address issues with tax collection at the retail level, especially relating to compliance.
MIDF Research foresees normalisation of OPR next year
According to MIDF Research, it expects Bank Negara Malaysia (BNM) to consider normalising its benchmark interest rate in 2022, despite keeping the overnight policy rate (OPR) unchanged at 1.75 per cent throughout this year. At this point, the policy normalisation will likely be carried out in the latter half of 2022. We believe the current focus of BNM’s monetary policy setting is to ensure a sustainable recovery of Malaysia’s economy, coming out from the full lockdown. With the rate of inflation hovering within BNM’s forecast, there is less pressure for BNM to quickly shift towards policy tightening. However the decision will be subject to the stability of economic growth, the pace of price increases and further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand. From a medium-term perspective, the policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as the persistently high inflation and a further rise in household indebtedness. At the Monetary Policy Meeting, the central bank decided to keep the OPR unchanged at 1.75 per cent, in line with MIDF’s and market’s expectations, as the current rate is deemed to be appropriate and supportive of Malaysia’s economic growth.
Eye On The Markets
This week, on Friday (05Nov), the Ringgit opened at 4.1590 against the USD from 4.1475 on Monday (01Nov). Meanwhile, the Ringgit was 3.0739 to the Sing Dollar on Friday (05Nov). On Monday (01Nov), the FBM KLCI opened at 1545.99. As at Friday (05Nov) 10:00am, the FBM KLCI is down 18.34 points for the week at 1527.65. Over in US, the overnight Dow Jones Industrial Average closed down 33.35 points (-0.09%) to 36,124.23 whilst the NASDAQ added 128.70 points (+0.81%) to 15,940.30.