KUALA LUMPUR, June 3 — Car prices in Malaysia are expected to increase by one to three per cent following the switch back to the goods and services tax (GST), the opposite effect compared to the aftermath of the implementation of the sales and service tax (SST) back in 2018, says AmInvestment Bank Bhd.

Analyst Alex Goh said the real estate investment trust (REIT) and media sectors could also be impacted by the GST, while the property sector could be vulnerable to softer demand from higher product prices amid heightened affordability concerns.

"REITs could experience slower footfall and tenant sales growth on reduced consumer spending, while the media sector could suffer from lower subscribers and advertising expenditure (adex) spending," he said in a note today.

However, Goh said most of the sectors — namely banks, oil and gas, plantation, telcos, power, healthcare, gloves, manufacturing, gaming and technology — would see a zero-to-negligible impact from the GST.

"Essential food manufacturers such as Nestle could partly benefit from cash assistance to the bottom 40 per cent income group (B40) and middle 40 per cent income group (M40)," he said.

He also expected the reimplementation of the GST to have a zero-to-negligible impact on most of the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) constituents, hence, he has maintained the base-case end-2022 FBM KLCI target at 1,745.

"Our worst-case outlook would be FBM KLCI dropping to 1,415, pegged to 2022 price-to-earnings ratio (PE) of 14.8 times, one standard deviation (SD) below its five-year median; driven by substantive earnings disappointments, fresh outbreaks of new COVID-19 variants, further geopolitical shocks and a reversal of foreign net flows.

"We maintain a blue-sky FBM KLCI index scenario at 1,820, pegged to 0.5 times SD above its five-year median, based on a stronger 2022 gross domestic product (GDP) growth of six per cent," he said.

Prime Minister Datuk Seri Ismail Sabri Yaakob was recently reported as saying that Malaysia is deliberating the reintroduction of GST to expand its revenue base and carry the weight of public subsidies.

"He said that while he was aware of the negative perception surrounding the GST, the government had limited options to replenish the country’s coffers.

"The prime minister said that the government would aim for a GST rate that was not so high that it would burden the people, yet not so low that it 'defeats the purpose of expanding tax revenue'," said Goh.

He added that in March this year, the Finance Ministry said that it was evaluating the reintroduction of the GST as part of major fiscal reforms to strengthen the country’s revenue capacity.

Bank Negara Malaysia had also voiced its support for the reimplementation of the GST as that would relieve the heavy financial burden faced by the government. — Bernama