Friday, July 16, 2010

OSK Research: Tenaga, Gamuda, MMC may gain from subsidy cut

KUALA LUMPUR: OSK Research said the government's decision to undertake an early subsidy cut, but at a smaller scale, were within its expectations.

It said on Friday, July 16 that as petrol prices are to be raised by only some 2.8% for now, it expects the impact on the auto, toll road and retail sectors to be limited.

The sugar price increase of 15% should see some costs being passed on to consumers but again, the impact on disposable income should be mild.

OSK Research said it expects more cuts in these and other goods possibly in 2011. It also identified three potential beneficiaries, namely TENAGA NASIONAL BHD [] which may secure its tariff hike, GAMUDA BHD [] and MMC Corp Bhd, which may lobby for subsidy savings be used to fund the KL MRT project, which may then kick off earlier rather than later.

"Overall, the cuts are a signal that economic reform is pushing ahead and we remain bullish on theFBM KLCI, particularly for 4Q, with an unchanged target of 1465 pts at year-end," it said.

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