KUALA LUMPUR: The stable labour market that supports domestic consumption is among the main factors providing a boost for the consumer sector moving forward.
In a note today, MIDF Research said the sector will also be supported by high tourist movement which supports retail sales and out-of-home consumption, and better margins for food and beverages (F&B) producers helped by lower commodity prices and a stronger ringgit.
"Hence, we maintain our "positive" stance on the consumer sector. We continue to prefer consumer staple-related companies as our top picks for the sector due to resilient demand for essential items despite multiple headwinds.
"We like QL Resources, underpinned by the steady demand for marine and livestock products. We also like F&N because the company is likely to benefit from the rising demand for ready-to-drink beverages, fuelled by an increase in tourist traffic," it said.
Meanwhile, given that the overnight policy rate (OPR) has stayed below the 3.00-3.25 per cent range (pre-pandemic level), together with moderating inflationary pressures and a stable labour market, MIDF Research is upbeat on domestic consumer spending in the short term.
"Furthermore, with various cash assistance, incentives and income tax reductions offered in Budget 2023 for B40 and M40 income groups to enhance household income and stimulate domestic spending, we expect retail sales to remain solid in 2023.
"Meanwhile, the higher arrival of tourists with the reopening of most nations' borders, notably from China, will further enhance Malaysia's retail sales," it added.