The additional $500 million jobs and business support package for SMEs announced as part of Budget 2022 is deemed positive for the three local banks, given how they will enjoy some relief from fallout of the pandemic.
As such, risks of non-performing loans – which is already at a level deemed “benign” - can be further lowered. In addition, the banks get to enjoy potential fee and loan growth, says Maybank Securities Singapore in a post-Budget commentary on Feb 19.
Furthermore, with more green bonds to be issued – as part of the wider push towards sustainability – Singapore’s green financing ecosystem can enjoy a lift, leading to potential higher fee income and incremental loan growth for the banks.
In addition, the government is extending the enterprise financing scheme for M&A loans to domestic deals as well.
By doing so, there could be more deal activity, driving demand for higher advisory, investment banking and advisory services.
Specifically for Singapore Exchange, which is a stock under coverage by Maybank Securities Singapore too, it will benefit from the potentially higher trading volume triggered by higher M&A activity involving Singapore listed companies.
Besides the banks and SGX, the telecom stocks – Singapore Telecommunications, StarHub and Netlink NBN Trust -- are beneficiaries of this year’s Budget too, albeit over the “medium term”.
The government plans to allocate an additional $200 million to help fund schemes that includes upgrading broadband infrastructure to increase speeds by up to 10 times; invest in future technologies including 6G mobile networks – the next generation from the current 5G.
The government is looking at exploring new possibilities for augmented and virtual reality tools too.
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“These should support the telco sector infrastructure enhancements and new business and use-case development,” says Maybank Securities Singapore.
With impending GST hike to 8% starting next year and a subsequent raise to 9% in 2024, retailers are likely to see some consumers spending before the increases take effect.
Retail REITs, such as CapitaLand Integrated Commercial Trust, SPH REIT, Suntec REIT and Frasers Centrepoint Trust are seen to have a “slight positive” impact, says Maybank Securities Singapore.
The Hour Glass and Cortina, the two listed luxury watch retailers here, are likely to see spending brought forward by consumers ahead of the extra tax to be paid to the government.
On the other hand, the Budget is seen somewhat negative on companies with a significant foreign workforce.
As announced, all companies employing foreign workers will have to pay local workers at least the qualifying salary of $1,400.
The so-called Progressive Wage Model – interpreted by some as a local answer to calls of a minimum wage system - will also be extended to more sectors including retail and food services, from existing ones such as the security guards and landscape workers.
“This will result in rising labour costs and margins pressure for F&B and supermarket chains,” says the brokerage, listing companies such as Jumbo Group, Kimly, Sheng Siong Group and Dairy Farm International Holdings.
With higher taxes to be levied on luxury cars, distributor Jardine Cycle & Carriage, which distributes Mercedes-Benz, is seen to be impacted, the brokerage notes.
