Budget 2022 was announced on 29 October 2021, last Friday. As the Budget Proposal was formulated to rebuild the economy with major themes including recovery, resilience, and reform. It will involve the country’s largest ever allocation of RM332.1 billion, leading to a budget deficit of 6% of Gross Domestic Product (GDP) based on Ministry of Finance’s (MoF) projection. Small Medium Enterprises (SMEs) as well as especially the B40-group and financially challenged were the main recipients of cash handouts and wage subsidies. As for the general investors, what’s in store for them?
Probably, may not be good with the introduction of a 33% marginal income tax bracket for companies on chargeable income of more than RM100 million (despite for a year of assessment 2022 only). Moreover, stamp duty on contract notes to be increased from 0.1% to 0.15% from 1 January 2022. Besides, the existing RM200 cap for each contract note will be removed. While this increase in stamp duty will be offset by exemption of service tax on brokerage activities, the transaction cost to investors, especially high net worth investors, will increase substantially.
Some market intelligences reckon that the one-off hike in corporate tax (or known as “Cukai Makmur”) could weight down the heavy weights. Hike in stamp duty, on the other hand, could discourage trading activities as well. As such, the equity market could further sell-down in the foreseeable future towards 1,545/40.
Apart from the big cap index FBMKLCI, some property counters, especially those that had performed strongly ahead of budget, such as Eco World Development Group (ECOWLD, 8206) and SP Setia (SPSETIA, 8664); may see more profit-taking activities as the “budget goodies” may not seem exciting.
In the proposed Budget 2022, the government has allocated RM2 billion Housing Credit Guarantee Scheme to facilitate loans for those without proof of steady income as well as the real Property Gain Tax (RPGT) waiver for property disposal on the sixth year onwards. Many market observers and tax consultants reckon that these benefits will not inspire corporate earnings substantially.
Having talked about all negatives, Healthcare and Digital sectors may benefit from the proposed budget. Healthcare players such as Pharmaniaga (PHARMA, 7081) could benefit from the expanded healthcare spending and expanded tax relief. Chart-wise, a convincing break above RM0.860 could suggest an Upside Volatility Breakout.
Under the Digital Ecosystem Acceleration Scheme, an income tax rate in the range of 0% to 10% is applicable for up to 10 years for new companies which are digital technology providers or 10% for up to 10 years for existing companies. For digital infrastructure providers, investment tax allowance of up to 100% on qualifying capital expenditure for up to 10 years is allowed whereby applications must be received by MIDA between 30 October 2021 and 31 December 2025. Potential beneficiaries to these incentives could be GHL System (GHLSYS, 0021) and revenue Group (REVENUE, 0200) as installers of a digital payment ecosystem.
Technically speaking, GHLSYS may stage an Uptrend Resumption should its immediate and next resistances of RM2.01 and RM2.05, respectively, are violated connivingly. The upside resistance levels of REVENUE are RM1.84 and RM2.00/02. Similarly to GHL, a convincing surge above RM2.00/02 will suggest an Upside Volatility Breakout.
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