Friday, October 7, 2011

HwangDBS: Budget ‘non-event’ for markets

Prime Minister Datuk Seri Najib Razak and his deputy Tan Sri Muhyiddin Yassin after the Budget 2012 presentation at Parliament in Kuala Lumpur October 7, 2011.

The market will not be impressed by Budget 2012 as it doubts flawed megaprojects slated for next year can drive growth, HwangDBS Investment Management Bhd said today.

Equities head Gan Eng Peng said investors did not believe megaprojects like the Klang Valley Mass Rapid Transit (KVMRT) and Kuala Lumpur International Financial District (KLIFD) would aid expansion given the numerous delays and flip-flops currently plaguing them.

“Furthermore, given that a few of the policies announced in the previous budget have been totally reversed, the credibility of more policy announcements here has worn thin.

“Hence, we think this Budget is a non-event for the market,” he said in a statement today.

However, he said since markets had so little expectation built into them, there would be no untoward sell-down.

Gan pointed out that the KVMRT was “blighted” by delays in the tender process, uncertain financing and land acquisition disputes, in addition to tardy decision-making and the abrupt change in project owners last month.

He said the KLIFD was also “not such a great idea” given the oversupply of commercial property space in Kuala Lumpur and the lack of critical mass in the capital to support a new financial district.

Gan also questioned the optimistic five to six per cent GDP growth projection for 2012, noting that global markets remained volatile and were unlikely to accelerate in the coming year.

“As a fund management company, we feel that the impact of the global slowdown is only starting to filter through into the real economy from late 2011.

“Thus, it is unrealistic for the government to expect a pick up in growth momentum now,” he said.

Two to three per cent growth was more realistic as the euro zone crisis, the sluggish US economy and the tight monetary policy in China were all expected to drag down Malaysia’s largely open economy, he added.

Prime Minister Datuk Seri Najib Razak said in his Budget speech today that Malaysia would be able to achieve GDP growth of up to six per cent and cut its fiscal deficit as strong domestic demand and commodities exports cushion the impact of a global downturn.

Authorities will trim development spending and maintain subsidies to keep prices down, while banking on low borrowing costs and a healthy job market to keep the economy growing on an even keel next year.

The government revised its 2011 growth target to five to 5.5 per cent of GDP from five to six per cent, and estimated that the budget gap would shrink further to 4.7 per cent next year from the projected 5.4 per cent deficit in 2011.

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