ATTRACTING FRESH FUNDS: Kaladher notes that the government’s commitment to liberalise the 17 aforementioned sectors should have some impact in attracting fresh funds going forward.

KUCHING: Despite the lack of any direct incentives to drive more foreign investments into the country from Budget 2012, the subsequent impact from some initiatives is expected to create spillover effects to spur more investments into Malaysia.

“One such move is the liberalisation of 17 sub-sectors which would bode well for improving Malaysia as an investment destination for foreign investors,” affirmed ECM Libra Capital Sdn Bhd’s head of research, Bernard Ching.

“Sectors to gain from this are the banking and consumer sectors, via tax incentives for developing the Kuala Lumpur Islamic Finance District, sukuk issuances, the listing of Felda Global Ventures Holdings (FGVH) and much more,” he highlighted.

This sentiment was shared by TA Securities Holdings Bhd’s head of research, Kaladher Govindan, who noted that the government’s commitment to liberalise the 17 aforementioned sectors should have some impact in attracting fresh funds going forward.

This was a move made by the Prime Minister as the services sector was the largest contributor to the nation’s economy, accounting for almost 58 per cent of gross domestic product.

The liberalising of the 17 services subsector would allow up to 100 per cent foreign equity participation.

However, OSK Research Sdn Bhd’s head of research Chris Eng felt that the budget ‘failed to make a big splash’ on the equity market.

“While the surprises were few, the positive surprises include the absence of a sin tax increase and the upcoming listing of FGVH while on the flip side, there were negative surprises in the form of an increase in Real Property Gains Tax (RPGT) and the imposition of an income tax on shipping companies,” Eng noted.

“This time around, with no sin tax hike and minimal mention of infrastructure projects, it is the education, shipping and property sectors which are most impacted.”

He added that shipping industry players were expected to be hit by the re-imposition of an income tax. ECM Libra’s Ching saw other dampeners from Budget 2012 to the business sector, including the increase in the Employee Provident Fund contribution by employers from 12 per cent previously to 13 per cent.

“In addition, the power sector is expected to be negatively impacted as the government’s push to alleviate the rising cost of living will diminish any hopes of a tariff hike in December this year,” Ching added.