The Council of Eminent Persons set up by the government has inspired the confidence of local investment banks, as it has identified key measures to address the nation’s economic issues by taking a holistic view of revenue and expenditure.
“While details are still patchy at this juncture, unsurprisingly so, considering that it has barely been a week since the change in government, it would seem that the new administration has hit the ground running,” said Public Investment Bank in a statement today.
It said although the council was only set up last Saturday, it has met up with government-linked investment companies, various pension funds, international ratings agencies, ministries and workers unions, among others.
“Expectations are running high that the country will actually come out stronger post-adjustments.
“However, we will also have to acknowledge that there will likely be short-term pains for the longer-term gains of structural reform,” it added.
The bank said though it was unable to assess the true economic impact at this point due to the lack of details, it still estimated that the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) would close the year at 1,860 points.
“We see greater opportunities in the mid- and small cap space, however, with some share prices having been beaten down despite no discernible changes in fundamentals,” it said.
The bank expects market conditions to remain encouraging, underpinned by improving global growth and earnings, adding, significant market weaknesses should be taken as opportunities to accumulate.
Meanwhile, Maybank Investment Bank Research said it expected comprehensive measures to be announced via a supplementary/mini budget amid ongoing questions on government finance.
“The devil is still in the details. The council acknowledges concerns regarding government finance arising mainly and especially from the removal of Goods and Services Tax and re-introduction of fuel price subsidies/stabilisation.
“Consequently, instead of piecemeal announcements of measures over the government’s first 100 days, we expect comprehensive measures via a supplementary/ mini budget that delivers the promises and address the government’s funding gap issue,” it said.
The bank continued to say that this could be done by looking at revenue and expenditure holistically, such as a review of the tax system and fiscal incentives, revenue enhancement from higher crude oil price, deriving cost efficiencies as well as plugging wastages and leakages in public sector spending.
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