Wednesday, 14 March 2012

RHB Research sees consumer spending growth remaining resilient

KUALA LUMPUR (March 14): RHB Research Institute forecasts consumer spending growth would remain resilient at 5.8% for 2012, albeit at a slower pace as compared to 2011.

It said on Wednesday that in 2011, domestic consumer spending grew by 6.9% on-year, the fastest in three years and stronger than the 6.5% on-year growth in 2010.

“We believe the rate of growth of consumer spending would slow in 2012 (vs. 2011) as the high levels of household debt has prompted Bank Negara (BNM) to further tighten its grip on consumer lending by imposing more stringent measures on consumer credit and this could have an impact on consumer spending,” it said.

Nevertheless, despite the credit tightening, RHB Research believes consumer spending would still remain relatively resilient for FY12, underpinned by the high savings rate, rising consumerism and favourable labour market conditions.

Furthermore, it believes that the impact of the tighter credit would mainly affect big ticket items such as property and vehicle sales and to a certain extent, electrical goods, as the banks now have more stringent criterion for approving housing loans and hire purchase loans.

“Underpinned by the resilient consumer spending outlook and despite the external headwinds, we remain positive on the topline growth outlook of the consumer sector (for all retail, F&B and sin stocks),” it said.

RHB Research reiterated its Overweight stance on the sector. Its top picks are QL Resources for the F&B segment and Parkson for the retail segment.

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