KUALA LUMPUR, Sept 17 -- RHB Research has made “overweight” calls on the construction, non-bank financial institution (NBFI) and gaming sectors for the upcoming Budget 2020 on expectations that the budget could be more expansionary than Budget 2019.

In a research note today, it said for the construction sector, the government may be looking to embark on some pump-priming to spur the domestic economy, possibly through speeding up existing infrastructure projects.

For the NBFI sector, the research firm said it expects more clarity from Bank Negara Malaysia to address both foreign insurers’ ownership limit and potentially the next phase of de-tariffication for motor and fire insurance rates, as well as the fine-tuning of tax relief for life insurance premiums and takaful contributions.

“Recall that the government has separated tax relief for life insurance and Employees Provident Fund (EPF) contributions in Budget 2019 from the previous RM6,000 combined limit to now RM4,000 for EPF contributions and RM3,000 for life insurance of takaful deductions.

“We do not rule out the possibility of such limits being refined to encourage the take-up of life insurance/takaful in the upcoming budget announcement,” it said.

For the gaming sector, RHB Research does not expect a further rise in gaming-related taxes or duties, as the sector is no longer a low-hanging fruit that the government can harvest for extra revenue.

“At 35 per cent, the casino duty in Malaysia is already the highest in the region excluding Macau, losing out to its regional peers when it comes to luring in the high rollers. We reckon that any further hikes may potentially reduce the total tax collection due to a loss in revenue from lower volumes,” it added.

Meanwhile, for the property, telecommunications, consumer and automotive sectors, the firm has made a "neutral” call as those sectors are expected to continue to receive incentives under the Budget 2020 announcement.

For Budget 2020, RHB Research expects the government to continue rolling out more incentives or financial assistance for the B40 group, as well as the M40 segment, to purchase affordable housing.

“At the same time, we hope the government will also review its current real property gains tax (RPGT) regime and pricing thresholds for foreign property purchasers. As local demand remains fairly weak, and coupled with the weak ringgit, we think it is reasonable to target more foreign purchasers to help absorb the supply in the local market,” it said.

It said allocations for the telecommunications sector should predominantly be driven by the five-year National Fiberisation & Connectivity Plan (NFCP), a holistic telecommunications industry blueprint to improve broadband access, connectivity, and adoption. 

For the consumer sector, despite the usual consumer-friendly measures including cash handouts, bonuses for civil servants and income tax relief possibly still being dished out in Budget 2020, the quantum may not be increased.

“This is in view of the government’s aim to manage the budget deficit. Hence, we are not expecting the upcoming budget to propel a strong uptick in consumer spending,” it added. 

-- BERNAMA