One-off 33% prosperity tax

 Dear Fellow Investor,

One-off 33% prosperity tax

 he highlight of the budget 2022 is the one- off 33% prosperity tax on companies with chargeable income over RM 100 million for the year of assessment 2022.  The blanket tax rate is previously  24 % levied on chargeable income and not net profit.  Based on Bloomberg data there were 145 companies out of 900 who earned over RM 100 million in financial year 2019 while in 2020 there were only 125 such companies.

For our managed accounts some of our RM 100 million chargeable income holdings include  Public Bank, Maybank, Dialog, F & N, United Plantations and Inari.  

There could be a knee jerk reaction next week to these shares but in my opinion it will be temporary.  Any correction will be bought by institutions and foreign funds as these are high quality blue chip shares with the proven ability to grow sales, revenues and earnings.  From a common sense point of viewpoint  any company that is able to earn  RM 100 million of profit has access to highly skilled auditors, tax experts and accountants   who have the skill to navigate the tax laws to minimize financial exposure.

Weekly  EWM, the ETF of Malaysian blue chips traded on the NYSE

Notice the Budget 2021 reaction reflecting the Friday weekly close. It was down an insignificant 1.13 % for the week capturing reaction to the Friday close in Malaysia after the market close and budget announcement.

The EWM is a very useful indicator to judge the KLSE reaction after a major news event and after the Malaysian markets close.

Overall the budget is expansionary and should help the lower income groups. It should boost consumer spending which is positive for consumer related stocks. There are also measures to boost home ownership which is positive for some construction and property counters.

I think the budget will boost spirits from the negativity of the public mood. Combine this with strong oil prices and the pandemic fading away Malaysia is on the road to recovery.

Take care
Bill

An Indian rhinoceros was born last week in Poland’s Wroclaw Zoo, a hopeful development in efforts to preserve the animals, which are threatened with extinction.

Born January 6, the female baby is the first Indian rhinoceros birth in the zoo’s 155-year history, the zoo said Wednesday. Its mom is 7-year-old Maruska, and its dad is 11-year-old Manas.

“Maruska, a first-time mom, behaves wonderfully,” zoo president Radoslaw Ratajszczak said in a statement on the zoo website. “She looks after her daughter, allows her to nurse, and is very delicate, despite weighing more than 2 tons.

“When she lies down, she’s very careful not to crush the little one, and even gently moves her aside.”

The baby is being cared for out of public view.
The Indian rhinoceros was close to extinction, but thanks to a protection program launched in the 1970s, there are some 3,600 now, including more than 170 living in 66 zoos worldwide.

Indian rhinoceroses can measure 12 feet 5 inches long and weigh up to three tons. They live in the wet, grassy areas of northern India. They mainly feed on grass, leaves and twigs but also on fruit and aquatic vegetation.