Every RM100 wage hike could slash consumer firms' earnings 2.7pct: Analysts

KUALA LUMPUR: Every possible RM100 increase in minimum wage could cut consumer companies' earnings by up to 2.7 per cent, according to analysts.

They also said a minimum wage hike will strengthen household incomes and domestic demand without fuelling significant inflation.

Kenanga Research said a minimum wage increase could cut consumer-sector earnings by 0.1-2.7 per cent for every RM100 rise.

However, the firm noted that stronger household incomes could provide some offset.

Kenanga Research said the impact would be differentiated across the sector.

Labour-intensive companies are likely to face greater cost pressures while benefiting from potentially stronger consumer spending.

"Consumer spending has a cushion, but not without headwinds," Kenanga Research said in a note.

The firm said household purchasing power should remain supported by targeted fiscal assistance such as Sumbangan Asas Rahmah and Sumbangan Tunai Rahmah, as well as potentially higher wages.

However, companies are entering a less favourable cost environment as labour, electricity, freight and selected input costs rise.

Price-sensitive consumers could also limit companies' ability to pass higher costs on to customers, putting further pressure on margins.

BIMB Securities sees a potential RM2,000 minimum wage as supportive of household incomes and domestic demand, saying it would make the benefits of economic growth more inclusive.

It said Malaysia's median monthly salary had risen steadily from about RM1,500 in 2010 to RM2,957 in 2025, broadly alongside successive minimum wage increases from RM900 in 2013 to RM1,700 in 2025.

BIMB Securities said previous minimum wage increases had not triggered significant inflationary pressures, with median salaries rising faster than both the consumer price index and producer price index.

It said food inflation remained the main driver of cost-of-living pressures, with food accounting for about 30 per cent of the CPI basket.

As such, a potential RM2,000 minimum wage would be more likely to boost incomes than trigger a sharp rise in inflation, it said.

Young workers are expected to be among the biggest beneficiaries, with median earnings for those aged 15 to 19 projected at about RM1,899 in 2026, below the proposed threshold.

BIMB Securities said raising the minimum wage to RM2,000 in 2027 could give workers in that age group an immediate 5.3 per cent increase in median earnings, while strengthening incentives to join the workforce.

However, the impact would remain uneven across industries, particularly in labour-intensive manufacturing.

BIMB Securities said sectors such as apparel, food processing, footwear, fabricated metal products and transport equipment employ a large share of lower-wage workers earning below or near the proposed threshold.

These segments could face greater labour cost pressures, potentially squeezing margins unless offset by productivity gains, automation or higher value-added production.

The firm said Malaysia's broader labour market generally showed a positive relationship between productivity and wages, with manufacturing, construction and services recording productivity gains alongside rising wages.

On balance, BIMB Securities said a potential RM2,000 minimum wage was consistent with Malaysia's broader objective of raising labour income, strengthening domestic demand and moving towards a higher-income economy.

It said near-term margin pressure on labour-intensive sectors could remain manageable if accompanied by productivity-enhancing investments and labour market reforms.

Meanwhile, Kenanga Research sees another potential headwind from overnight policy rate (OPR) normalisation, forecasting a possible 25-basis-point hike in the first quarter of 2027.

Historically, consumer sentiment and share prices weakened following two of the three previous OPR hiking cycles.

The firm said companies that can capture resilient consumption without taking on disproportionate cost pressures should be better positioned.

Despite the challenges, Kenanga Research remains "Overweight" on the consumer sector, saying many concerns have been increasingly reflected in valuations following recent share price weakness.

It favours companies with defensive demand, manageable cost exposure and better earnings visibility, with QL Resources Bhd as its top pick, rated "Outperform" with a target price of RM4.40.