Energy Volatility, Subsidy Adjustments Could Dent Consumer Spending
CIMB Investment Bank Bhd (CIMB Securities) has maintained a Neutral call on the consumer sector, with analyst highlighting downside risks to Retail Group Malaysia’s (RGM) 4% 2026 retail sales growth forecast, citing weaker-than-expected 4Q25 retail sales, cautious consumer spending and potential inflationary pressures from the Middle East conflict that have yet to be fully incorporated into forecasts.
Malaysia’s retail sector underwhelmed in 4Q25, with sales growth of 2.5% year-on-year, significantly below earlier expectations of 5% year-on-year, as consumers remained prudent despite stronger macroeconomic indicators, including robust GDP growth.
CIMB Securities noted that FY25 retail growth ended at 2.4% year-on-year, below RGM’s earlier 3.6% projection, reflecting a disconnect between economic expansion and household spending.
The research house said essential retail segments continued to outperform while discretionary categories weakened. Mini-markets, convenience stores and cooperatives led growth at 15.9% year-on-year, while furniture and furnishings dropped 7.6% and department stores also recorded declines, underscoring continued caution around big-ticket purchases.
CIMB Securities added that the later timing of the Chinese New Year 2026 may shift some festive demand into 1Q26 but overall sentiment remains subdued.
Looking into 2026, RGM maintained its 4% retail sales growth forecast, supported by Bank Negara Malaysia’s GDP projection of 4% to 5% and government cash assistance measures totalling RM15 billion under STR and SARA.
However, CIMB Securities said downside risks remain as inflationary impacts from global energy volatility and subsidy adjustments could pressure household budgets further.
CIMB Securities continued to favour defensive consumer plays and downtrading beneficiaries, highlighting MR.DIY, Farm Fresh and Life Water as top picks.
It said MR.DIY offers improving earnings quality through store optimisation and disciplined expansion, while Farm Fresh is supported by volume-led domestic growth and regional expansion across ASEAN.
Life Water was also highlighted for resilient demand, capacity expansion and multiple growth drivers including new customer rollouts and tourism-related consumption trends linked to Visit Malaysia Year 2026.
