KUALA LUMPUR (Nov 1): The FBM KLCI fell more than 20 points in Monday (Nov 1) morning trade as investors evaluated the government’s Budget 2022 proposals which include the implementation of a special one-off tax on companies which report annual taxable income of more than RM100 million.

At the time of writing, the index had fallen 25 points or 1.6% to 1,537.3.

Last Friday, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said in his Budget 2022 speech that under the special one-off tax, the government will impose a 24% income tax on the first RM100 million portion of companies’ annual taxable income, while the remaining taxable income will be subjected to a 33% income tax.

According to Tengku Zafrul, the Covid-19 pandemic-driven special one-off tax is crucial to generate revenue for the government to ensure that the country’s public health system is more sustainable in facing future threats.

On Monday, TA Securities Holdings Bhd analysts wrote in a note that given the bearish signals emitted by multiple technical momentum and trend indicators following last week's correction of the KLCI, further downward correction is in store this week. 

"The negative market reaction expected from the surprise one-off windfall tax of 33% on corporate profits above RM100 million for listed companies from the Budget 2022 proposal should trigger a knee-jerk downward correction of key blue-chip index heavyweights, hence the index should suffer a gap-down in early trade on Monday before stabilising. 

"However, this will produce an ideal bargain-hunting opportunity for sidelined investors to position themselves for longer-term gains ahead,” TA  Securities added.

Meanwhile, Hong Leong Investment Bank Bhd analyst Ng Jun Sheng wrote in a note on Monday that following the KLCI’s weakening technical readings, "coupled with the sentiment-damaging” Budget 2022 proposals including the special one-off tax, the KLCI may experience a knee-jerk sell-off this week.

Ng, however, said the KLCI’s severe downside risk may be cushioned by Covid-19 vaccine-driven aggressive economic reopening activities and elevated commodity prices.