Stocks to watch: Proton, property stocks, banks

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KUALA LUMPUR: The RM60 billion stimulus package, which is a lifeline to steer the country from the brink of a serious recession, will give a boost to companies including Proton, Perodua, property developers and also banking stocks on March 11. The RM60 billion stimulus package and the tax proposals will have an impact of reducing businesses’ cash outflow through tax, and this would be helpful to them, says Deloitte Malaysia head of tax practice, Ronnie Lim. Palm oil producers will also benefit from the higher threshold for the windfall profit levy. Efficient producers like IOI Corp and Kuala Lumpur Kepong would be stocks to watch and also smaller players like IJM Plantations. The strong overnight close on Wall Street on March 10, driven by a positive report from Citi that it was profitable in the first two months of this year, would also boost the local stock market. These measures and the improved sentiment on Wall Street should spur the local stock market on March 11. Proton and Perodua car owners who trade in their cars, which are at least 10 years old, to buy new Proton and Perodua cars, will get a RM5,000 discount. This scheme is to stimulate car sales, as well as reduce carbon emission. Banks are expected to benefit from the proposed deferred interest income as they will only be taxed when such interest income is received or paid by borrower. At present, such interest income is taxed even though it is not received yet. Property developers will also benefit from the move to boost the sentiment in the sector. The government proposed to give house buyers tax relief on housing loans up to RM10,000 a year for three years. Construction and infrastructure companies are expected to benefit from the RM8.4 billion package for projects under the Ninth Malaysia Plan, which have high local content and multiplier effect, people-centric and can be implemented immediately. A total of RM2.28 billion had been allocated for basic amenities in rural areas, especially Sabah and Sarawak, including infrastructure like roads. Palm oil producers will also benefit from the higher threshold for the windfall profit levy. Currently, the levy is imposed when crude palm oil is above RM2,000 per tonne.  The threshold is increased to RM2,500 per tonne in peninsular and RM3,000 for Sabah and Sarawak due to higher production costs. Deloitte Malaysia’s Lim said the tax proposals would also help money circulate in the economy. Lim said two items of related to tax in the mini-budget which are particularly novel, h are the loss carry back and the accelerated capital allowance. “The loss carry back is really good, and judging by the amount of total losses allowed to be carried back, which is up to RM100,00, this is meant to benefit the SMEs, and this will be a real push for them. I hope this will become a permanent feature. “The accelerated capital allowance for expenses on renovation and refurbishment of business premises is also a business-friendly move, also expected to benefit SMEs. This will help money to be circulated into the economy,” he said. Khazanah Nasional said the RM60 billion is sufficiently chunky to have an immediate and significant impact while the 80:20 (RM48 billion: RM12 billion) split between private sector/capacity building initiatives and social safety net measures is well balanced and well crafted. It added that Khazanah and companies in its stable expected the stimulus package would intensify and accelerate the implementation of investment plans in high economic multiplier, strategic, service-oriented sectors including telecommunications, leisure and tourism, technology. These sectors including ICT, creative industries and sustainable development or “green” technologies, life sciences, healthcare and agriculture.   The investments in these sectors in 2009 and 2010 by Khazanah and major GLCs will total more than RM10 billion, with the potential to create an estimated 70,000 jobs by 2011.