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Budget 2024's 'investment tilt' to benefit banks, industrials, energy plays, says Maybank

The Edge Singapore
The Edge Singapore • 6 min read
Budget 2024's 'investment tilt' to benefit banks, industrials, energy plays, says Maybank
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The Budget 2024 announced by Deputy Prime Minister Lawrence Wong on Friday has a more discernible "investment tilt" to spur on investments in green transition, human capital, critical infrastructure and high-quality foreign investments.

In contrast, the preceding edition was focused more on supporting lower-income households and wealth redistribution.

"There were more support rolled out to tap on national competitive advantages," state Maybank economists Chua Hak Bin and Brian Lee Shun Rong in their Feb 17 note.

For example, the Financial Sector Development Fund will be topped up by $2 billion, which the Monetary Authority of Singapore will use to extend Singapore’s lead in core areas of financial services and develop emerging fields like FinTech, green and transition finance. 

An additional $3 billion will be injected into the Research, Innovation & Enterprise 2025 (RIE2025) plan, worth some $25 billion, to sustain R&D investments at about 1% of GDP. 

To catch on the AI bandwagon, more than $1 billion will be invested over the next five years into AI development, and additional resources will be put towards upgrading the Nationwide Broadband Network to enable ten times faster internet speeds to up to 10 Gbps.

See also: What may be included in Singapore's unemployment benefits for retrenched workers?

As part of the broader transition to go green, Wong has announced a $5 billion Future Energy Fund to help build critical infrastructure such as submarine cables for electricity import, grid upgrades and energy generation & storage facilities. 

"Our equity analysts think the enhanced support should benefit companies in the renewables space as well as boost loan growth and related fees for banks, as the new fund helps catalyse more green investments," the Maybank economists write.

The Assurance Package will be boosted by $1.9 billion to $12  billion, to help support basic consumption and defray cost pressures. 

See also: Sustainability leaders welcome $5 bil Future Energy Fund, hope for hydrogen breakthrough

"Individuals and small enterprises won't have to resort to undue belt-tightening and forced asset sales. Companies will be supported by 50% income tax rebate, enhanced enterprise financing scheme and risk sharing of project loans for domestic construction projects," state Chua and Lee.

Other key Budget measures include a refundable tax credit scheme to support R&D, set up manufacturing capabilities and help energy transition should help banks with loan growth. 

The Maybank team including Thilan Wickramasinghe, head of research Singapore at Maybank Securities believes that with these measures, the banks — DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank U11 -

— will see lower asset quality risks. They will also enjoy a positive impact on loan growth/issuance of debt securities, while AI-related funding should help banks to further their capabilities.

The Singapore Exchange S68 -

Group, meanwhile,  is likely to benefit from the top-up of the financial sector development fund.

For the industrial sector, the $5 billion Future Energy Fund to support energy transition at the onset is of particular interest.

Other measures, such as tax credit with refundable cash features to support R&D, setting up of manufacturing facilities and green transition activities, as well as the $1 billion AI fund and National Productivity Fund by $2 billion, are all seen as positives.

According to Maybank, companies involved in energy transition and sustainable infra development, such as Sembcorp Industries U96 -

 and Keppel Corp, to benefit incrementally. Investment tax credits should enable new R&D for companies like ST Engineering.

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For the internet and telecom and gaming sector, the good news is this time round is in the form of an additional $3 billion for RIE2025 national R&D masterplan, plus the upgrading of the nationwide broadband network to make broadband speeds 10 times faster than now.

"This may help TMT players such as Singtel, StarHub CC3 -

, Grab and Sea to offset some of their R&D expenses and offer more enriched services," says Maybank.

For the broader technology sector, companies will be offered tax credits with refundable cash features to support research and development, setting up of manufacturing facilities and green transition activities, as part of the bid to compete for new global investments in this space.

The additional $1 billion to be invested in AI will help ensure Singapore can secure access to advanced chips that are key to AI development and deployment. 

From Maybank's perspective, this will be positive for the clutch of tech companies under its coverage: Venture Corp, AEM Holdings AWX -

, UMS Holdings 558 - , Aztech Global 8AZ - and Frencken Group E28 - , who will get to enjoy higher tax rebates as they conduct most of their R&D activities in Singapore while manufacturing is done out of Singapore. 

"In addition, the government working with leading AI companies could lead to some potential partnerships/collaborations or as new customers for these manufacturers in Singapore," adds Maybank.

As part of the Budget, all adult Singaporeans, some 1.4 million, aged 21 to 50 will get a one-time MediSave Bonus of up to $300. 

In the healthcare sector, private healthcare operators such as IHH Healthcare Q0F -

and Raffles Medical may benefit from higher local patient loads.

Companies in the services sector, such as F&B operators, retailers, and hospitality providers might be impacted before higher qualifying salaries.

Yet, defensive F&B and supermarket operators such as Kimly 1D0 -

and Sheng Siong will likely benefit from higher consumer spending and also from the use of CDC vouchers, state Maybank. 

In addition, REITs with retail exposure such as Frasers Centrepoint Trust J69U -

and Capitaland Integrated Commercial Trust are also going to benefit from the additional CDC vouchers.

Real estate agencies like Propnex OYY -

, Apac Realty could be potential beneficiaries of higher transaction volumes while CSE Global 544 - will likely benefit from new contracts from the new National Cybersecurity command centre as well as more electrification works as the government looks to diversify into clean energy sources for Singapore, adds Maybank.

Industrial REITs, such as CapitaLand Ascendas REIT A17U -

and Mapletree Industrial Trust ME8U - , which have hi-tech spaces and data centres, are likely to benefit in the medium term from the investment boost for the tech sector.

Meanwhile, for developers such as UOL Group and City Developments, the Budget is "marginally positive", following the lower ABSD clawback rate and better flexibility on achieving full sales, according to Maybank.

Read more about Budget 2024 on The Edge Singapore.

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