RM33.8 bil wiped off market cap in knee-jerk reaction to 'cukai makmur' proposal

RM33.8 bil wiped off market cap in knee-jerk reaction to 'cukai makmur' proposal
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KUALA LUMPUR (Nov 1): A cumulative RM33.8 billion of value was wiped off the market capitalization of stocks on Bursa Malaysia on Monday in a knee-jerk reaction to the government’s one-off 'cukai makmur' (prosperity tax) proposal.     

The major selloff saw the total value of the stocks come down to RM1.77 trillion from RM1.81 trillion last Friday.

The FBM KLCI, meanwhile, closed down 31.39 points or 2.01% to 1,530.92, its biggest one-day decline since March 31 when the US bond yield and dollar surged.

Market breadth was overwhelmingly negative as 991 losers outnumbered 178 gainers, while 332 counters remained unchanged.

A total of 3.47 billion shares worth RM3.23 billion changed hands compared with 3.03 billion shares worth RM2.35 billion last Friday.

The one-off prosperity tax of 33% on corporate earnings of more than RM100 million for the assessment year 2022 was among several proposals announced in Budget 2022 last Friday to raise the government’s revenue.

The tax proposal is seen to have a negative impact on the earnings of a host of listed companies, and investors reacted to this by selling off their shares. 

Based on Bloomberg data, index heavyweights in the financial sector were especially affected by the tax proposal.

Public Bank Bhd lost RM2.53 billion in market value followed by Hong Leong Bank Bhd (RM1.86 billion), CIMB Group Holdings Bhd (RM1.84 billion), RHB Bank Bhd (RM1.02 billion) and Malayan Banking Bhd (RM712.4 million).

The financial services index tumbled 15.76 points or 2.77% following the sell-off.

Meanwhile, the property and construction index were also reeling from the announcement with the former falling by 31.47 points or 4.02% and the latter by 6.21 points or 3.61%.

Among the big names in the property sector that saw a major decline in value were S P Setia Bhd Group (RM732.2 million), Gamuda Bhd (RM527.8 million), and Eco World Development Group Bhd (RM353.4 million), according to Bloomberg data.

Telecommunications and media companies were also victims of the violent wipeout, led by Telekom Malaysia Bhd (RM1.13 billion), followed by Axiata Group Bhd (RM1.10 billion), Maxis Bhd (RM547.9 million) and TIME dotCom Bhd (RM383.4 million).

This is notwithstanding the potentially positive news for the sector in the form of an RM700 million sum earmarked for the JENDELA and 5G infrastructure rollout next year.

Local bourse operator Bursa Malaysia Bhd also saw some RM339.9 million of its market capitalisation wiped out as it closed 42 sen or 5.59% lower at RM7.09.

This comes after multiple downgrade calls on Bursa Malaysi made by research houses such as CGS-CIMB, Hong Leong Investment Bank and AmInvestment Bank on Monday.

Analysts said the surprise announcement of the prosperity tax, along with the increase in the stamp duty rate from 0.10% to 0.15% and the removal of the maximum cap of RM200 per contract note, could reduce the average daily trading volume (ADTV) as trading costs rise for investors.

For a market that has historically been stagnant as foreign and local retail participation is low compared with local institutional participation, the actual effects of the new tax measures remain to be seen.

Read also: RM5.8b in market cap recovered after Monday Nov 1, 2021's sell-off 
See more Budget 2022 highlights here.

S Kanagaraju