KUALA LUMPUR: Service tax on broker's charges to execute transactions is expected to have minimal impact on trading activity on Bursa Malaysia.
The government announced that brokerage services would be taxed under the new eight per cent service tax regime.
"We believe this will have a minimal impact on trading activity on Bursa Malaysia Bhd as the incremental costs per trade are rather small," RHB Investment Bank said in its note today.
Based on its estimates, a RM50,000 trade with a 42 basis points brokerage fee would incur an additional three basis points to the overall cost as a result of the service tax (+6 per cent to transaction cost).
"We believe that retailers will be more sensitive to the new tax, but also reiterate that the impact should not be too meaningful," RHB Investment Bank said.
It maintains its financial year 2023-2025 securities average daily value, or SADV, forecasts of RM2.3 billion, RM2.4 billion and RM2.6 billion.
RHB Investment Bank believes that trading velocity on Bursa Malaysia is still most dependent on the fundamentals of the listed companies, as well as overall market sentiment.
RHB Investment Bank maintains its end-2023 FBM KLCI target at 1,500pts.
"As we are expecting no major shifts in the domestic outlook, we keep our positive stance on Bursa Malaysia," it said.