Minimum wage to have mixed impact on consumer sector: Kenanga Research

KUALA LUMPUR: A potential minimum-wage increase could cut earnings by 0.1 per cent to 2.7 per cent for every RM100 increase across Kenanga Research's consumer coverage.

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 household purchasing power should remain supported by targeted fiscal assistance such as Sumbangan Asas Rahmah and Sumbanfan 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.

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 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.