Stephen Hagger
Managing director and head of equities Credit Suisse Securities (Malaysia)

Hagger believes that the measures introduced to increase disposable income of the corporate sector and the layman will bode well for the local banking sector.
"Some of the measures introduced to alleviate inflation for the consumer as well as companies, such as for the construction sector, will be positive for the banking sector. This will ensure that there is no build-up of non-performing loans in the sector," he says.
Among the key measures proposed in Budget 2009 to boost disposable income for consumers, is a higher tax rebate (RM400 compared with the previous RM350) for the chargeable income group of up to RM35,000. Tax rates for the chargeable income group exceeding RM35,000 up to RM50,000 and those earning in excess of RM250,000 have been reduced by one percentage point respectively. They are effective 2009.
Additionally, tax has been fully exempted on interest income from deposits in all financial institutions, where previously interest income was taxed at 5% except for Lembaga Tabung Haji, Bank Simpanan Nasional and selected institutions approved to take deposits.
The construction sector, meanwhile, will enjoy reduced import duty (5% versus the previous 20%) on port cranes, effective immediately. The budget has also abolished the import licence on port cranes and heavy machinery such as bulldozers and road rollers.
Hagger wasn't too excited, however, over the introduction of incentives for the listing of foreign companies and products on Bursa Malaysia.
Budget 2009 has proposed that income tax exemption be given on fees of corporate advisers for primary, dual or cross listings of foreign-based corporations, exchange trade funds and real estate investment trusts (REITs) with foreign-based assets, foreign listed securities and foreign financial institutions.
"It's a marginal development, we're not sure if this will make a huge difference in their [foreign companies'] decision-making process as there are other factors that lead them to decide where to list," says Hagger.

Gerald Ambrose
Managing director, Aberdeen Asset Management Sdn Bhd

The budget, with its "people friendly" incentives, appears to have been designed to stimulate private consumption, says Ambrose. "However, the budget deficit is a little worrying," he adds.
Commenting on the measures introduced to help citizens burdened by the fuel price hike, Ambrose says the allowances were "to offset the public transport infrastructure in the Klang Valley, which is not that very good".
Among the measures introduced in Budget 2009 are tax exemptions for travel allowance between the home and work place of up to RM2,400 a year and up to RM6,000 annually for official duties. Road tax for diesel vehicles owned by individuals and companies has also been reduced, to be equal that of road tax for petrol vehicles.
Ambrose commended the reduction of withholding tax on real estate investment trusts (REITs), saying this puts Malaysia nearly on a par with Singapore's regulations.
Budget 2009 has reduced the withholding tax for foreign institutional investors and individual investors in REITs listed on Bursa Malaysia to 10% respectively. However, that is only effective from Jan 1, 2009 until December 2011. Previously, foreign institutional investors were subject to a final withholding tax of 20% for five years and individual investors at 15% for five years.
"Ideally, investors would like as few constraints as possible, but this is a positive step as some REITs here offer a very good yield and so this a good development," says Ambrose.

Robert Prior-Wandesforde
Senior Asian economist, HSBC

"As expected, Malaysia announced major revisions in its Budget 2009 which, together with Bank Negara Malaysia's easy monetary policy stance, are highly expansionary in nature," says Prior-Wandesforde.
According to Prior-Wandesforde, the 2Q2008 gross domestic product (GDP) growth of 6.3% was above market expectations of 6%. However, this is below HSBC's 6.7% forecast.
"Overall, and despite the various measures to reduce inflation, one would have thought that Bank Negara would be rather disturbed by what is clearly a highly expansionary budget. In practice, however, recent events suggest we can't take this for granted. Although growth is slowing and will probably continue to do so, largely because of the synchronised global downturn, it is not collapsing and is unlikely to happen not least because of the government's easy fiscal stance," he adds.
He is cautious about the government's ability to cut its deficit to 3.6% of GDP next year. Under Budget 2009, the government has revised the budget deficit target to 4.8% for 2008 versus the original 3.2%.
"Although the budget deficit is projected to decline to 3.6% of GDP in 2009, this number includes another 12% y-o-y rise in development expenditures, a modest planned reduction in subsidies, while assuming another 14% rise in government revenues. It is, therefore, doubtful whether the government will be able to reduce its deficit drastically to 3.6% of GDP next year," says Prior-Wandesforde.
Prior-Wandersforde believes the country's expansionary fiscal/monetary policy settings do not augur well for the ringgit market. He adds that while total government funding requirements have been revised upwards to RM60 billion this year, it is still uncertain how the government intends to finance its increased funding requirements, namely, the mix between short-term and long-dated MGS/MGII issuance and between MGS/MGII issuance and private placements.
"This probably explains the remarkable resilience of the MGS curve, post-budget announcement. Nevertheless, combined with expansionary monetary policy settings and upside pressure on US dollar/ringgit, the curve will likely be biased towards further (bearish) steepening," he adds.

Lim Chee Sing
Head of research,
RHB Research Institute Sdn Bhd

The budget, essentially, reflects policymakers' commitment to combat inflation, and sustain Malaysia's economic growth, says Lim.
Fiscal measures, such as tax cuts and higher tax rebates, are deemed timely to boost domestic demand to cushion a potential decline in the nation's economic expansion amid weakening exports and slower home consumption.
At the same time, the government's move to slash or abolish import taxes especially for food products is expected to reduce prices of end products, hence, minimising the risk of imported inflation.
"It's all about easing inflation towards protecting growth amid a global slowdown," says Lim. He adds that it is crucial to ensure that construction projects under the Ninth Malaysia Plan proceed as planned to enhance economic well-being.
The real estate sector is expected to benefit from the latest budget. The 50% stamp duty exemption for individual loans to purchase residential properties, priced up to RM250,000, is anticipated to spur demand for houses amid a slowdown in the local sector.
Although withholding tax for the Malaysian REITs was reduced, Lim says players still need to tackle the issue of "low liquidity due to the lack of size and free float. The most ideal move is to abolish the withholding tax".

Dr Lai Mun Chow
Economist, ECM Libra Investment Bank

The domestic-based services sector will be the biggest beneficiary from the budget, says Lai. This is due to the orientation of the budget which is skewed towards relieving inflationary pressure on consumers, and sustaining growth.
"More specifically, the wholesale and retail trade, accommodation and restaurant, financial services, and utilities are the key service industries that will directly or indirectly benefit from the stimulus measures aimed at boosting disposable income of consumers," says Lai.
The budget, however, lacks concrete policy measures to boost the country's industrial export competitiveness. Lai says it is crucial that the government find ways to retain existing foreign companies and attract new foreign investors as overseas investors are deemed the lifeline for the future growth of Malaysia's export-oriented manufacturing sector.
"Foreign investors are spoilt for choice now. Unless Malaysia can come up with a strong value proposition, there is little reason for foreign investors to continue keeping Malaysia on their radar screens," says Lai.
On the whole, he described the budget as "pragmatic and people-centric", considering that the government has moderately raised development expenditure by 14% from RM40.6 billion in 2007 to RM46.3 billion in 2008, and by 11.8% to RM51.7 billion in 2009.

Azrul Azwar
Senior economist, Bank Islam Malaysia Bhd

The budget is a "rakyat-centric" initiative, says Azrul. This is by virtue of the populist measures, such as tax cuts, to relieve the burden of rising inflation on the man in the street.
Worth noting are local policymakers' commitment to ensuring consistency of energy and food supply amid rising prices of those items, besides measures to encourage private sector investments in the country, according to the economist.
Consumer spending and private investments are key drivers of domestic demand which, in turn, is important to cushion the nation's economic growth should local exports decline.
"Overall, Budget 2009 seems to be a budget to win back the hearts and minds of the Malaysian electorate. In the past, normally, incentives are geared towards the lower income group but now the scope is wider to include middle-income earners," says Azrul.
"The budget singles out specific measures to ensure energy and food security. I also note that the budget aims to strengthen domestic demand as a cushion is the face of global adversity," says Azrul.