KUALA LUMPUR: The government's higher RM16 billion allocation for Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (Sara), along with the personal income tax measure under the 2027 Budget, is expected to sustain household consumption and support retail sector earnings, particularly among essential goods and value retailers.
RHB Research analysts Soong Wei Siang and Aidil Puzi said in their equity research report today that while recurring financial assistance per household remains largely unchanged under the 2027 Budget, the greater emphasis on Sara is expected to channel more consumer spending towards essential goods.
"From the recent budget proposal, we noted that the recurring assistance per household has been largely unchanged, but a greater Sara component will direct more spending towards eligible essentials," they said.
The broader Sara offering and one-off festive assistance should further support purchases, while higher wages from Jun 2027 provide an additional boost to disposable income, the report said.
"We expect these measures to reinforce the sector's earnings growth outlook, with essentials and value retailers better placed to benefit given their customer bases are skewed towards lower- to middle-income households," said RHB Research.
From the sectorial lens, the bank said the consumer sector should remain relatively defensive amid market uncertainty, supported by its domestic-centric earnings base and continued government assistance to support spending.
"Looking into the 2027 financial year forecast, a resilient labour market, wage growth and continued fiscal support should underpin consumption," it said.
RHB Research stated that cash assistance and tax relief should help preserve household purchasing power, although higher living costs are likely to keep consumers selective.
"This should favour spending on essentials and value purchases, supporting our preference for staples and discounters, said the research report.
"As for stock picks, expect this to favour participating chains such as 99 Speed Mart Retail Holdings Bhd, Eco-Shop Marketing Bhd and Mr DIY Group (M) Bhd with higher sales through existing stores improving fixed-cost absorption and helping offset wage pressures," it added.
© New Straits Times Press (M) Bhd