Cukai Makmur, Increases in Stamp Duty May Have a Short-term Negative Effect on Market Sentiment

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The proposed one-off windfall tax known as “Cukai Makmur” and proposed adjustments to the stamp duty on contract notes used in listed share trading could trigger a knee-jerk reaction and impair market confidence in the immediate term, according to Malacca Securities Sdn Bhd.

The government has proposed in Budget 2022 to apply the Cukai Makmur on businesses (other than micro, small, and medium-sized firms) that make a large income during the Covid-19 period, effective in the assessment year of 2022. Chargeable income over RM100 million would be taxed at a rate of 33%, while chargeable income up to RM100 million will be taxed at a rate of 24 percent.

“Around 15% of publicly traded companies generate more than RM100 million profit before tax, and the total earnings impact on the FTSE Bursa Malaysia KLCI (FBM KLCI) heavyweights will be roughly 10% -12% (back of the envelope calculation),” the brokerage said in a note on Sunday (Oct 31).

Malacca Securities stated that stockbroking businesses and Bursa Malaysia may also see a decline in trading activity following the abolition of the RM200 contract notes stamp duty cap on January 1, 2022.

The RM200 stamp duty threshold was imposed in 2003 to stimulate Malaysia’s capital market.

Despite the proposed Cukai Makmur, Malacca Securities anticipated certain beneficiaries from Budget 2022, including those in the automobile, consumer, telecommunications, technology, healthcare, e-sports, tourism, and healthcare sectors.

The brokerage is unaffiliated with the construction, property, security, and defence industries, as well as transportation and logistics.

Regarding the FBM KLCI’s performance, it stated: “Support is positioned around 1,548, followed by 1,514. Meanwhile, resistance is estimated to be between 1,581 and 1,604.”

Published by Zack Baharum

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