Here Are The Winners and Losers From Malaysia’s Biggest Budget

(Bloomberg) -- Malaysia unveiled its biggest spending plan on record to revive its virus-battered economy. 

Prime Minister Ismail Sabri’s government allocated 332.1 billion ringgit ($80 billion) for expenditure next year, which it hopes will help economic growth rebound to 5.5%-6.5%.

While the budget is expected to aid several businesses, the proposal for a one-time tax for some companies may weigh on investor sentiment already frayed by the political turmoil and protracted lockdowns for most of this year. 

The nation’s benchmark stock index capped its seventh day of losses on Friday, falling into the red toward the end of the session. The gauge is down 4% for the year, compared with double-digit gains in other Southeast Asian markets such as Vietnam, Thailand and Indonesia.  

“The record spending will aid the pace of economic recovery with healthcare, auto and education sectors potentially benefiting the most,” said Danny Wong, chief executive officer of Areca Capital Sdn. “Higher corporate tax can neutralize the impact on earnings and make this budget popular with people but neutral for markets.” 

Here’s a look at some of the key winners and losers.

WINNERS

Healthcare, Education

The education ministry will continue to receive the biggest allocation totaling 52.6 billion ringgit, followed by the health ministry at 32.4 billion ringgit, Finance Minister Zafrul Abdul Aziz said in parliament.

Hospital operators such as IHH Healthcare Bhd. and KPJ Healthcare Bhd. may gain, along with drugmakers Duopharma Biotech Bhd. and Pharmaniaga Bhd. The drugmakers have helped procure and package Covid-19 vaccines.

Companies linked to the education sector include college operator SEG International Bhd., while IJM Corp., which constructs schools, may also benefit.

Property 

The removal of a property gains tax on the sale of homes from the sixth year after its purchase coupled with an allocation of 2 billion ringgit to a housing credit guarantee program will benefit developers. Key stocks to watch include Eco World Development Group Bhd., SP Setia Bhd. and SIME Darby Property Bhd.

Auto

The move to extend ongoing tax breaks on automobiles, including electric vehicles, may aid UMW Holdings Bhd., a supplier to Toyota Motor Corp.; Bermaz Auto Bhd., which assembles vehicles for Mazda Motor Corp.; and DRB-Hicom Bhd., a supplier to Honda Motor Co. 

Palm Oil

Planters can benefit from a move to increase the windfall tax levy threshold, but the optimism may be offset by the higher tax rate for companies. Among bigger stocks in the industry, watch Sime Darby Plantation Bhd., Kuala Lumpur Kepong Bhd. and IOI Corp. 

The ones that will gain the most are planters making less than 100 million ringgit and those with most of their operations in peninsular Malaysia. Watch Boustead Plantations Bhd. and TH Plantations Bhd. 

LOSERS

One-Time Tax

The plan to introduce a one-time “prosperity” tax of 33% on companies making more than 100 million ringgit will likely affect several corporates. Company incomes up to 100 million ringgit will continue to be taxed at 24%.

Malayan Banking Bhd., glove makers including Top Glove Corp., and hospital operators such as IHH Healthcare Bhd. are among the nation’s top publicly traded companies.

Excise Duty

The government has proposed levies on sugary drinks and nicotine products used in electronic cigarettes as it seeks to promote a healthier lifestyle. 

Chocolate, coffee, tea and malt mixes are among beverages that will attract excise duty, Zafrul said, without providing details. 

Watch British American Tobacco Malaysia Bhd., Nestle Malaysia Bhd., and Fraser & Neave Holdings Bhd.

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