Blue-chip stocks rebound to boost Bursa

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KUALA LUMPUR: The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) recovered some losses from Monday’s instinctive drop in the prosperity tax as banking heavyweights regained ground lost yesterday.

At yesterday’s close, the FBM KLCI rose 6.71 points to 1,537.63 against 1,530.92 on Monday, driven by bank stocks during the morning trading session.

Such activity, however, began to run out of steam as the trading session continued.

However, most of them regained their momentum and ended the day unchanged or up.

CIMB Holdings Bhd Group closed five sen up to RM 5.09; RHB Bank Bhd finished three sen higher at RM 5.36; while Malayan Banking Bhd, Public Bank Bhd and AMMB Holdings Bhd ended the day without change.

Blue-chip stocks, especially banks, hit their stock prices on Monday following the surprise announcement of a tax hike for highly profitable businesses in Budget 2022 to help the government to ease the burden of its debt.

Last Friday, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said that a one-time special prosperity tax would be imposed on companies with pre-tax profit over RM100 million. Profits above this threshold would be subject to a tax rate of 33% for tax year 2022, instead of the initial social rate of 24%.

This is expected to largely affect businesses in the banking, brewing, tobacco, utilities, gloves, telecommunications, automotive, palm oil and tech industries.

Banks were among the main losers on Monday, as were food and drink players, which were weighed down by the hike in excise duties on sugary drinks.

Analysts have estimated that the windfall tax could cut between 6% and 12% of corporate profits, although this should be offset by the positive spillover effects of the expansionary budget proposals on the economy at large.

One analyst said the impact on blue-chip stock prices Monday, especially banks, was likely a knee-jerk reaction to the budget announcement.

“However, the rebound in stock prices of banking heavyweights indicates that investors are still bullish on the prospects for local banks,” he said.

In a note, Maybank Investment Bank Research said it remains positive for banks as the pace of contraction in working capital loan applications slows and is expected to turn.

“With the gradual opening of the economy, we expect loan growth to strengthen in the coming months and maintain our industry loan growth forecast at 3.8% (annualized 3.4% at the end of September 2021) “, he said.

At the same time, RHB Research said that the sharp rise in system lending in September, which offsets the month-to-month contraction in August, portends stronger sequential loan growth for the third quarter of 2021.

On the performance of the larger KLCI FBM, the winners topped the losers 629-404, while 434 counters remained unchanged, 808 untreated and another 15 were suspended.

Regionally, the Japanese Nikkei 225 lost 0.43% to 29,520.9; the Singapore Straits Times index rose 0.39% to 3,231.51; Kospi of South Korea gained 1.16% to 3,013.49; while Hong Kong’s Hang Seng Index dipped 0.22% to 25,099.67.


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