Yuan TJ

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🇲🇾Malaysia Budget Outlook: Tightening Purse Strings or Bull Market Kickoff? 💰📈

🇲🇾【Prelude】

Dear retail investors, the Budget 2026 is coming soon! 🎉 This time it’s not an ordinary budget, but a "transformation budget": from the painful period of subsidies to the harvest period of reforms. The government's theme this time is very clear—📊 "Seek progress while maintaining stability, and seek strength through reform."

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💰【Fiscal Direction: Stability Does Not Mean Dullness】

The government intends to continue "responsible consolidation," with the fiscal deficit expected to narrow from -3.8% (2025) to -3.4% (2026), moving towards the target of < -3% by 2030.

It sounds very "accounting," but the key point is: it's not about cutting expenses, but rather about "smart taxation" to fill the gaps🧠.

New actions include:

🔹SST increased to 8% (non-essential goods)

🔹Unlisted share capital gains tax (10%)

🔹Higher-income dividend tax (2%)

🔹Diesel subsidy cut, saving RM7 billion

🔹Full implementation of e-Invoicing to enhance tax transparency

These reforms will generate over RM20 billion in additional annual revenue 💸. In a nutshell: Stable government revenue fosters market confidence.

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🏗️【Spending Focus: People First】

While aiming to save costs, the government will not 'cut to the bone.' On the contrary, Budget 2026 is highly people-friendly ❤️.

Cash assistance programs (Rahmah, SARA, STR) are projected to exceed RM15 billion, with civil servants also expected to receive a 3–7% salary increase.

Development expenditure (DE) remains as high as RM95–100 billion, continuing to push forward large-scale infrastructure projects, such as:

🚝 Penang LRT, ECRL, MRT3, Johor ART

🛣️ Water supply and transportation projects across various states

The construction sector is expected to take off again! $GAMUDA (5398.MY)$ Gamuda, $IJM (3336.MY)$ IJM, $SUNCON (5263.MY)$ SunCon are all potential winners 🔥.

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📉 [Inflation and Monetary Policy]

Inflation is projected at 3.0–3.3%, with BNM expected to maintain the OPR at 3.00%. This means no increase in mortgage rates and no volatility in the stock market 😎.

The only thing to note is the short-term fluctuations in prices after the reduction of fuel subsidies.

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🌾🚗🏥【板块亮点】

🌱 Planting industry: The storm tax threshold has increased, palm oil price RM4,000/t, income is stable.

⚡ Automotive: Major upgrade in EV policies, CKD BYD and Perodua EVs are about to hit the road🚙. Tax incentives for EV components continue to increase.

🏗️ Construction: The Budget 2026 is referred to as the "Catalytic Budget," making a push before the election!

🛍️ Consumption category: RM15 billion cash assistance + tourism boom (Visit Malaysia 2026) = consumption takeoff.

🍺 Fast-Moving Consumer Goods: Health Tax May Be Coming, But Beer Stocks Remain Strong ($CARLSBG (2836.MY)$ Carlsberg,$HEIM (3255.MY)$Heineken's performance is stable.

🏥 Healthcare: Budget increased by 10%, with a focus on the upgrade of Klinik Kesihatan and the implementation of an electronic medical records system.

⚡ Energy: Carbon tax introduced, electricity prices adjusted by less than 2%. $TENAGA (5347.MY)$ Tenaga, $MALAKOF (5264.MY)$ Malakoff benefit from the green transition.

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🌏 [Cross-sector Trends]

🔥 Subsidy rationalization: RON95 subsidies to be gradually tightened in the future.

💻 e-Invoicing: Full implementation by July 2026; small businesses will also need to adopt the system, expected to increase revenue by RM4 billion.

🌿 Carbon tax + ESG policies: Initial rate of RM2–5 per ton of CO₂ equivalent, paving the way for green bonds and CCUS technologies.

🎨 Tourism economy: Visit Malaysia 2026 aims for 35 million tourists, benefiting retail, REITs, and aviation sectors.

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💡【Investment Themes】

1️⃣ Reform Momentum: Fiscal credibility supports the Malaysian Ringgit & credit ratings.

2️⃣ Domestic Demand Recovery: Cash assistance + Tourism boom = Consumption upgrade.

3️⃣ Infrastructure Surge: High Debt-to-Equity ratio + Election cycle = Continuous flow of contracts ☔.

4️⃣ Green Transition: Carbon tax, renewable energy, and Third-Party Access (TPA) = New era for Utilities.

5️⃣ Digital Compliance: e-Invoicing + AI tax analytics → Enhanced transparency.

6️⃣ Corporate Catalysts: EV, semiconductors, and data centers drive growth 💻⚙️🔋.

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🎯【Conclusion】

Budget 2026 is a symphony of 'rationality and ambition' 🎶.

Rather than slashing the budget, it refines the structure; rather than splurging, it provides targeted support.

For investors, this is the year when the dividends of reform officially materialize.

If the past three years were marked by 'reform pain,' then 2026 will be the 'year of confidence.' 💪

Are you ready? If retail investors don’t act, opportunities will slip away! 🚀

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