Malaysia’s Budget 2025

Malaysia’s Budget 2025 is poised to create a range of opportunities and challenges for companies listed on the FTSE Bursa Malaysia KLCI (Kuala Lumpur Composite Index). The budget focuses on infrastructure expansion, digitalization, and measures to ease the cost of living, while imposing certain tax changes that could impact some industries more than others.

Key Beneficiaries:

1. Construction and Infrastructure Companies: Firms like Gamuda and IJM Corporation are set to benefit from large-scale infrastructure projects included in the budget, such as the continuation of the Mass Rapid Transit Line 3 (MRT3), the Pan Borneo Highway, and other regional infrastructure developments in Sabah and Sarawak. The emphasis on these mega projects will fuel growth in the construction sector, enhancing the outlook for companies involved in large-scale civil works.
2. Property Developers: Developers focusing on affordable housing, such as Lagenda Properties and Mah Sing Group, are likely to gain from government measures to boost home ownership, especially through initiatives like the Home Ownership Program and the Madani Deposit Scheme. These efforts to ease home financing for first-time buyers will support demand in the property market.
3. Technology and Digital Services: Companies like My E.G. Services (MYEG) and Inari Amertron stand to gain from the government’s increased focus on digitalization and incentives for technology sectors. MYEG is well-positioned to benefit from enhanced government digitization efforts, while tech-related firms like Inari are likely to capitalize on expanded support for semiconductor development and smart infrastructure projects.

Potential Losers:

1. Consumer Goods and Luxury Imports: The expansion of the sales and service tax (SST), which includes non-essential imported goods such as luxury items like salmon and avocado, will likely affect the consumer goods sector. This may lead to a downturn in demand for premium imported products, negatively impacting companies dependent on the sale of such goods.
2. Dividend Tax Impact: The newly introduced 2% tax on dividend income exceeding RM100,000 may affect investment-heavy companies and their investors. Firms that have traditionally attracted high-income investors due to their dividend payouts, such as utilities and plantation stocks, might face downward pressure, particularly from high-net-worth individuals.
3. Sectors Dependent on Subsidies: The rationalization of fuel and other subsidies in mid-2025 could put pressure on businesses reliant on energy inputs, particularly transport and logistics firms. The higher operational costs due to subsidy reductions might dampen profitability for companies in these sectors.

General Economic Impact:

The 2025 budget strikes a balance between expansionary fiscal policies and deficit reduction. Aiming for GDP growth between 4.5% and 5.5%, the government is committed to improving infrastructure and spurring economic growth while gradually reducing the fiscal deficit. The increase in minimum wage and cash aid transfers will boost consumer spending, benefiting retail and consumer-driven sectors. However, the reduction in subsidies and new taxes could drive up costs for businesses and consumers, potentially leading to inflationary pressures​

Business Times​

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In summary, sectors tied to infrastructure, property, and technology are set to benefit the most from Budget 2025, while those reliant on consumer spending, luxury goods, or fuel subsidies may face headwinds. These insights can help guide investment decisions and portfolio adjustments based on the evolving economic landscape in Malaysia.