KUCHING: Consumption spending will stay resilient in 2020 but subdued growth is expected, analysts project.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) recapped that based on the recent Malaysian Institute of Economic Research (MIER) survey, the third quarter of 2019 (3Q19) Consumer Sentiment Index (CSI) contracted by nine points quarter on quarter (q-o-q) to 84 points.
“Moving into 2020, we believe that consumption spending will stay resilient but subdued growth is expected, in line with the weak CSI,” the research firm said in its latest report on ‘Malaysian Consumer’.
“Nevertheless, we do foresee some positive catalysts, although not substantial, to boost consumption growth next year.”
“These include a supportive Budget 2020, Visit Malaysia Year 2020 (VMY2020) and recovery of crude palm oil (CPO) prices.”
AliianceDBS Research observed that this Budget 2020 will be mildly positive for the consumer sector even though it addressed the issue of rising costs.
The research firm recapped that the government had announced a few initiatives to improve the livelihood of Malaysians, especially the bottom 40 income group (B40).
“Overall, we believe that this Budget 2020 will be mildly positive for the consumer sector as the initiatives outlined will help to offset the impact of rising cost of living.
“However, these are not considered significant catalysts for the sector.”
On VM2020, AllianceDBS Research highlighted that increased tourist arrivals are set to boost spending.
It further highlighted that the sector as a whole should benefit from increased tourist spending with the roll out of VM2020 related programmes.
“For the first nine months of 2019, Malaysia’s international tourist arrivals and tourist receipts increased by 3.7 per cent and 6.9 per cent year on year (y-o-y), to 20.1 million and RM66 billion respectively.
“The authorities are targeting 30 million international tourist arrivals in 2020 with total tourist receipts estimated of about RM100 billion, driven by VM2020.”
As for CPO prices, AllianceDBS Research noted that these have recovered since the second half of 2019 (2H19).
“Since hitting a low of RM1,865 per tonne in June this year, CPO prices have been trending up. It is currently trading above RM2,700 per tonne.
“The sustained price recovery of CPO could boost purchasing power of the workforce and growers in palm oil related sectors, which in turn may induce higher consumer spending in rural areas.”
Overall, the research firm believed that Dutch Lady Milk Industries Bhd, Fraser & Neave Holdings Bhd, and Nestle (Malaysia) Bhd could benefit from increased consumer spending arising from Budget 2020’s initiatives and recovery in CPO price.
“Meanwhile, Mynews Holdings Bhd, 7-Eleven Malaysia Holdings Bhd, Aeon Co. (M) Bhd and Berjaya Food Bhd are well positioned to capitalise on higher tourist spending from VM2020.”