KUALA LUMPUR: RHB research expects consumer spending to be restrained in the near term as incomes struggle to keep pace with the rising cost of living.
Nonetheless, the bank backed research firm said that the strong employment market and continued government assistance for lower-income segments are likely to bolster overall consumer spending, especially for essential items.
"Furthermore, the resurgence in tourist arrivals is poised to benefit sectors such as breweries and consumer retail companies.
"Additionally, the introduction of Account 3 by the Employees Provident Fund (EPF), which allows for more flexible withdrawals, could stimulate discretionary spending among locals," it said in a research note.
According to RHB Research, it expects sector sentiment to stay cautious until there is clearer visibility on the execution of different subsidy rationalisation initiatives and potential introduction of new consumption taxes.
This will enable investors to more accurately evaluate the potential inflationary effects.The bank has reaffirmed its "Neutral" stance on the consumer products sector and has identified its top picks as MR D.I.Y (M) Group Bhd, Guan Chong Bhd, Heineken Malaysia Bhd, DXN Holdings Bhd, and Focus Point Holdings Bhd.
RHB Research said it maintains a positive outlook on MR D.I.Y due to its strong underlying fundamentals, which will support growth even in challenging conditions."Meanwhile, Guan Chong stands out due to robust demand, leading to increased average selling prices (ASPs) and a potential reduction in hedging losses moving forward."Heineken Malaysia is expected to benefit from the uptick in tourist arrivals, and its valuation remains reasonable with an attractive dividend yield," it said.
The research note also mentioned that DXN presents a moderate valuation despite maintaining steady earnings and dividends, which can be attributed to its efficient business model."Focus Point is poised for continued growth, supported by a growing population with myopia, and we anticipate a sustainable recovery in its food and beverage (F&B) business," it concluded.