Players In The Technology And Utility Sectors Are Expected To Benefit From 12MP

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Analysts believe IT companies, which are now experiencing an e-commerce boom fueled by the Covid-19 pandemic, will benefit from the 12th Malaysia Plan (12MP), given the government’s commitment to driving digitalisation and accelerating technology use in order to expand the economy.

On Monday (Sept 27), the stock market edged slightly higher, as the impact of the 12MP on the economic prognosis for 2022 was pronounced neutral. The KLCI rose 0.83 points to 1,532.89 at Monday’s opening bell, but quickly fell to 1,526.14 in morning trade as investors elected to stay put ahead of Prime Minister Datuk Seri Ismail Sabri Yaakob’s presentation of the 12MP report to Parliament. The benchmark FBM KLCI finished at 1,533.05. It was up 0.99 points or 0.06 percent.

Imran Yassin Yusof, research head at MIDF Amanah Investment Bank Bhd, said the 12MP appears to be a bold and ambitious plan that intends to not only boost the country’s economy following the epidemic, but also to reform and alter the economy’s structure.

“We believe that the primary benefactor will be the technology sector, as this will serve as the catalyst for achieving the 12MP’s stated objectives. With extensive connectivity also essential, the telecommunications industry may benefit as well,” he told on Monday.

Imran Yassin added that technology will also be a critical facilitator for other sectors to advance up the value chain. This, he explained, will result in increased productivity, higher salaries, and reduced reliance on low-skilled foreign employees.

Thus, he anticipates that the financial industry will gain from greater investment demand and the spillover impact of rising salaries.

“It will also help maintain our economy’s competitiveness. We also appreciate the fact (as expected) that sustainability has been emphasised through initiatives such as the adoption of a circular economy, addressing environmental, social, and governance (ESG) challenges, and pushing the adoption of green building standards.

“What will be critical moving ahead is the implementation of these many initiatives,” he explained.

Thong Pak Leng, vice president of research at Rakuten Trade, concurred, saying he is encouraged by the government’s efforts to accelerate the rollout of 5G, which is critical for Malaysia’s goal of becoming a high-income, high-tech nation.

“The epidemic has increased the number of individuals working from home and increased the use of the internet and digital economy. With the government’s efforts to expedite the growth of high-speed, dependable internet, we believe the country will benefit from increased business and job prospects.

“We also expect that an increasing number of enterprises will migrate to the digital economy. As a result, we anticipate positive spillover effects on telecommunications and technology-related companies such as VSTECS Bhd, Omesti Bhd, Ramssol Group Bhd, MyEG Services Bhd, TIME dotCom Bhd, and OCK Group Bhd,” Thong stated.

Despite this, he is neutral on the 12MP, describing it as lacking “enthusiasm” among the financial community, as evidenced by Monday’s stock market result.

CGS-CIMB Research said in a note on Monday that Tenaga Nasional Bhd (TNB), Malakoff Corp Bhd, and Cypark Resources Bhd should gain from prospects in renewable energy (RE), while TNB should benefit from more grid investments. Petronas Gas Bhd and Gas Malaysia Bhd are projected to benefit as well from the increased domestic gas demand.

Danny Wong, chief executive officer of Areca Capital Sdn Bhd, believes that investors will take time to comprehend the 12MP and that the market will also be monitored for current issues such as the slow reopening of the lockdowns.

“In addition, the plan must be outlined in full. As is often the case, a sound strategy requires sound execution, as time will demonstrate,” he remarked.

Wong added that another reason for the market’s lack of enthusiasm is that the government needs to address some investment worries. This includes ensuring the market and economy remain open to increased private and foreign investment and consumption.

Wong also referred to recent proposals for regressive policies, including a capital gains tax and a one-time higher tax rate on enterprises that performed well during the pandemic, as well as quotas and excessive protection, all of which might result in long-term retrogression. Ismail Sabri stated in his address that Bumiputera-owned companies and shares may be sold solely to other Bumiputera consortiums, firms, and individuals, as the government seeks to further empower the community under the 12MP.

Published by Zack Baharum

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