KUCHING: The consumer sector outlook is neutral going forward as global economy is expected to be stronger in 2013.
MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) stated, “We are upbeat on the effects of Visit Malaysia Year 2013/2014 on the retailing sector.” According to historical trend, Visit Malaysia Year 2007 saw retail sales grow by 12.8 per cent supported by a growth in tourist arrivals of 20.1 per cent.
The research arm expected retail sales growth to be 11 per cent, with Budget 2013 measures that directly improved disposable incomes as well as 11 new projects under the National Key Economic Areas lined up for 2013.
“We also believe that any potential negative impact on the local tourism industry resulting from unfavourable external events should be minimal given that Malaysia is a relatively cheap holiday destination,” the MIDF Research explained, adding that Kuala Lumpur was ranked the 13th cheapest Asian holiday destination.
On the other hand, MIDF Research believed that prices of soft commodities should moderate at comfortable levels.
According to the research arm, the resumption of subsidy rationalisation and and possible implementation of a Goods and Service Tax (GST) could pose a potential challenge to industry players as margins might be squeezed.
“In view of the government’s commitment to reform, we expect the GST to be introduced in a matter of time, but not in 2013.
“Subsidy rationalisation, on the other hand, was applied to refined sugar products following the announcement of Budget 2013 at the end of September,” MIDF research said.
As such, it foresaw food and beverage (F&B) players to feel a slight impact on earnings moving forward.
The research house said that F&B players would normally record their strongest sales in the first quarter, partly spurred by the Chinese New year celebrations and generally higher prices.
“Although prices are ‘administered’ by the government during festivals, there is allowance for a marginal price hike to reflect market conditions.
All considered, we expect prices of F&B items to stay stable in 2013, increasing only moderately.” However, the research house saw a potential risk of F&B inflation spiking up in the event of further and substantial subsidy cuts on items such as sugar.
Overall, it noted that 2012 sentiment was strong amidst international economic weakness.
MIDF Research thus expected global economy to be stronger in 2013, but in the event of a global economic turbulence, it expected consumer sentiment to remain resilient.
“The transmission mechanism of external economic weakness on domestic consumer sentiment has not proven to be strong.
“Domestic factors, such as unemployment, low inflation, minimum wage and the Economic Transformation Programme should keep sentiment healthy.”