KUALA LUMPUR (Jan 2): The consumer sector in Malaysia is expected to see positive growth in 2025, driven by a combination of wage increases, rising disposable income and improved economic conditions, said Apex Securities.
As the country prepares for several key fiscal changes in the coming year, including a rise in minimum wages and government salary adjustments, the outlook for consumer spending remains promising.
According to a note on Thursday, Apex cited the Retail Group of Malaysia's (RGM) projection of a 4% growth rate for the consumer sector in 2025.
Apex was of the view that this is an achievable target, aligning with the anticipated overall economic growth rate of 4.5%-5.5% for the year.
This growth is expected to be supported by an increase in disposable income, as both public and private sector wages are set to rise significantly.
Civil servants received salary increases of 4-8% starting December 2024, while the minimum wage across all industries will be raised by 13%, from RM1,500 to RM1,700, in February 2025.
These wage hikes are expected to boost the purchasing power of Malaysian consumers, particularly in rural areas, where the impact of the minimum wage increase could stimulate increased spending.
Additionally, the government’s larger cash handouts in 2025 are anticipated to further alleviate the pressures of high cost of living, providing consumers with more financial flexibility.
The consumer sector is also likely to benefit from the 30% year-on-year increase in tourist arrivals by October 2024, which is expected to drive retail activity and enhance demand for consumer goods.
Apex believes that a stable Malaysian ringgit and steady employment rates will help businesses in the consumer sector protect their profit margins.
In the first half of 2025, both consumer staples and discretionary sectors are expected to experience a boost, driven by key festive periods such as Chinese New Year and Hari Raya Aidilfitri, which historically stimulate consumer spending.
"With higher disposable income and upcoming festivities in 1H2025, our top picks in the consumer sector are CCK (buy, FV:RM1.70) and Karex (buy, RM1.04)." it added.
Despite these positive indicators, Apex has maintained a "neutral" stance on the consumer sector.
While the increase in disposable income and a potentially higher spending environment are encouraging, inflationary pressures could dampen consumer behaviour.
Source: https://theedgemalaysia.com/node/739649