KUALA LUMPUR, Jan 16 — MIDF Research remains upbeat on the consumer sector due to a stable labour market that supports domestic consumption and on the various cash assistance and incentives to low income groups.

Price control for certain products, fuel and electricity subsidies, higher tourist arrivals, better margins for food and beverage producers due to lower commodity prices as well as a stronger ringgit would further support retail sales, it said.

"Hence, we are maintaining our positive stance on the consumer sector.

"We continue to favour consumer staple-related companies as our top picks for the sector due to resilient demand for essential items despite multiple headwinds,” it said in a research note.

On the feedstock price, MIDF Research reckons it to remain steady in the near term.

According to the National Action Council on Cost of Living (NACCOL), the price control policy and chicken subsidies will be maintained until the targeted subsidy mechanism policy is implemented.

The current retail chicken price ceiling is RM9.40 per kg, and the retail price for chicken eggs ranges from 41 sen to 45 sen per egg depending on grade.

"Hence, given that the cost of chicken feed is expected to remain high in the near term, the continuous government subsidy of eight sen per kg for chicken and eight sen per egg could provide some margin support to poultry players,” it added.

MIDF has also forecast a stronger ringgit in 2023, with an average of RM4.30 against the US dollar.

The strengthening of the ringgit will benefit food and beverage companies and poultry producers as most commodities are purchased in US dollars and thus the stronger ringgit will reduce input costs.

"On the flip side, a stronger ringgit is a negative for export-oriented companies that sell their products in the greenback,” it said.

MIDF Research expects the upward momentum of retail sales to continue this year, aided by the stable job market and easing inflationary pressures.

"Furthermore, we believe that higher tourist arrivals, particularly from China will increase retail trade and that will benefit local retailers.

"In addition, we think that the potential cash assistance and incentives for low income groups in the upcoming Budget 2023 will encourage consumer spending on necessities and support retail sales,” it said. — Bernama