Consumer Sector Holds Steady Amid Global Uncertainty

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THE consumer sector should still provide a defensive shelter and offer earnings visibility despite the uncertain global macroeconomic outlook. 
This is in view of its domestic-centric earnings base and resilient consumption trends from stable employment and continuous fiscal support from the Government.
That said, the robust performance of the large-cap stocks may have largely priced in the positive attributes whilst the soft consumer sentiment should still cap discretionary spending. 
“Still neutral on sector. We expect Budget 2026 to bring more excitement and be friendlier than usual to the sector,” said RHB.
Allocations for fiscal  may increase, thanks to the material savings from various key reform measures. This should help alleviate the cost of living pressures for the lower-income groups, and consumer staples companies should benefit.
On the other hand, a higher excise duty or widened scope for such levies could be on the cards for “unhealthy” consumables (sugar-sweetened, tobacco or alcohol products), in line with the Government’s aim to manage the burden of non-communicable diseases.
2Q25 sector results were largely in line (six within estimates, six below and two above). Both 99 Speed Mart and Nestle (M) surprised on the upside, thanks to the improved sentiment towards Nestle brands. 

Unsurprisingly, the sales of some consumer discretionary players weakened QoQ due to the earlier timing of Aidil Fitri this year. That said, consumer staples companies generally chalked solid numbers. 
Consumer sentiment remained subdued during the quarter as a result of inflationary pressure, and further dampened by US tariff actions, which triggered worry of slower economic growth ahead. 
As such, consumer spending was cautious and selective, prioritising daily essential items. Consumer sentiment could bottom out, in our view, given clarity on the US tariff situation, the Overnight Policy Rate cut, and strengthening of the MYR. 
On top of that, stimulus packages (MYR100 MyKasih credit, lower RON95 petrol price, extra public holidays, etc) announced by Prime Minister Dato’ Seri Anwar Ibrahim announced in July should also buoy sentiment.
Meanwhile, easing commodity prices could translate to lower input costs for food manufacturers like Nestle (M), QL Resources, Leong Hup International and Power Root, towards 2H25, further aided by the MYR strength. 
Whilst more details on the RON95 petrol subsidy rationalisation have been made known of late, the next key question concerning the sector would be on if and how the Government will withdraw the subsidies from high-income earners, in order to gauge the potential inflationary impact.
Downside risks to our sector outlook include a major slowdown in economic growth and a sharp surge of commodity prices. — Focus Malaysia

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