Expanded SST set to weigh on consumer spending: Analyst
Economy & Business
By Diyana Isamudin
KUALA LUMPUR: The expanded Sales and Service Tax (SST) is expected to hit consumer spending in Malaysia, as higher prices on non-essential goods and a broader range of taxed services take effect starting July 1.
CIMB Securities Sdn Bhd the expanded SST is negative for the consumer sector due to increased operating costs and weaker consumer demand.
"We expect most consumer companies will need to raise selling prices to pass on additional costs, which could further weaken spending power.
"The expanded SST is likely to erode wallet sizes, particularly owing to higher price points for non-essential goods and the broader range of taxed services," the firm said in a note.
Under the new tax structure announced by the government, selected non-essential and luxury goods will now be subject to a 5–10 per cent sales tax.
While essential items — such as rice, cooking oil, bread, sugar, local fruits and medicines — remain exempt, discretionary goods like imported fruits, king crab, truffle mushrooms and racing bicycles will face new levies.
Additionally, services across six key sectors — including rental and leasing, construction, financial services, private healthcare, education and beauty services — will be taxed at rates between 6.0 per cent and 8.0 per cent, depending on the type of service and revenue generated.
CIMB Securities said the expanded tax regime is also expected to stoke near-term inflation, adding pressure on consumer sentiment already weighed down by subsidy reductions and a lack of major festive spending in the second half of 2025.
Given the weak consumer sentiment, the firm said consumer companies could also potentially face margin pressure, as consumer companies might absorb part of the cost increases in order to ensure affordability for consumers.
CIMB Securities kept its "Neutral" outlook on the consumer sector, citing current fair valuations and persistent challenges, including weak consumer sentiment, ongoing boycott actions affecting brands like Nestlé and Berjaya Food and elevated cost pressures.
Its top pick in the consumer space are 99 Speed Mart Retail Holdings Bhd with a "Buy" call and target price of RM2.60, supported by its large-cap staple stock with a defensive sales mix skewed to daily necessities.
The firm also favours Farm Fresh Bhd with a target price of RM2.25 as the earnings growth supported by capacity expansion and regional diversification and Padini Holdings Bhd with a target price of RM2.55 for its attractive valuations, strong cash balance and appealing dividend yields.
0 Comments
No comments yet. Be the first to comment!