Friday 29 Mar 2024
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KUALA LUMPUR (March 15): A government cash handout budgeted before a national election has ignited interest in consumer stocks, with a gauge of retail stocks more than doubling the gain of the benchmark Malaysian FTSE Bursa Malaysia KLCI Index.

Riding on strong economic growth and rising oil prices, Prime Minister Najib Razak has raised subsidies and social assistance in the government’s 2018 spending plans by 15 percent after two years of cuts, bidding to shore up his support with voters. The country is due for national elections before August.

“A lot of cash handouts were announced in the budget, and basically people believe consumer spending would come back," Gan Huan Wen, an analyst at Hong Leong Investment Bank Bhd., said by phone in Kuala Lumpur. "A lot of funds are overweight on the consumer sector, that’s why valuations have been running.”

Nestle Malaysia Bhd., a unit of the the world’s largest food and beverage manufacturer, has surged 37 percent to a record this year, adding 8.8 billion ringgit ($2.3 billion) to its market capitalization.

The rally has also spread to beverage makers Dutch Lady Milk Industries Bhd., up 13 percent, and Fraser & Neave Holdings Bhd. which advanced 22 percent. Brewers Carlsberg Brewery Malaysia Bhd. rallied 35 percent and Heineken Malaysia Bhd surged 20 percent.

The government disbursed the first of three parts of the cash handout in February, aimed at increasing household spending for lower income households, in addition to one-time payments to civil servants, income tax relief and aid to rural communities as part of Najib’s 280 billion ringgit spending plan for 2018. The next payouts are scheduled for June and in August.

Sales of consumer products may continue to gain after the official election campaign starts, according to Tan Hai Hsin, managing director at Retail Group Malaysia. Spending by consumers could also increase further after the elections with a release in pent-up demand, said Tan in the firm’s quarterly report released Wednesday.

“The upcoming Malaysia general election is one of the main reasons Malaysian consumers have been taking a wait-and-see attitude on their retail spending,” he said.
 

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