Potential winning and losing stocks from Singapore's 2022 Budget

Singapore's move to space out the much-anticipated increase in goods and services tax over two years may be positive for consumption-linked companies. PHOTO: ST FILE

SINGAPORE - The Singapore market's response to this year's Budget has been positive so far, with the Straits Times Index closing higher on Monday (Feb 21) at 3,436.36, up 0.2 per cent from the close last Friday.

Finance Minister Lawrence Wong unveiled a Budget on Friday that seeks to rebuild Singapore's finances and chart a post-pandemic future by raising taxes on the wealthy and on consumption. It also seeks to support the sectors worst affected by the pandemic and reduce income inequality across the economy.

Analysts said the tax changes and extended incentive schemes in the latest Budget are positive for some firms, such as those that are reducing their carbon emissions. Others, including some property developers and luxury vehicle distributors, may see setbacks to business as costs come under pressure.

As a whole, OCBC Bank analysts say, there will be "more business opportunities, innovation and growth in the longer term". They expect the more positive environment to "attract more investments and create new jobs".

Here are some stocks that may be impacted by the new taxes announced;

Stepped hike in good and services tax (GST)

This will be raised from 7 per cent to 8 per cent in 2023, and 9 per cent in 2024, which came as a surprise as many analysts had expected the Government to raise the GST directly to 9 per cent.

This could potentially catalyse consumer spending in the short term, benefiting consumer-focused stocks such as grocers Sheng Siong and Dairy Farm, DBS said.

Restaurants and food caterers such as Jumbo Group and Kimly could also see gains, while casino operator Genting Singapore may also get a lift.

Real estate investment trusts (Reits) with retail exposure such as Frasers Centrepoint Trust, CapitaLand Integrated Commercial Trust and Suntec Reit also stand to gain, Maybank said.

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Wealth taxes on income, property and luxury cars

From 2023, property tax rates will be raised from 4-16 per cent to 6-32 per cent of estimated rent for owner-occupied homes, and from 10-20 per cent to 12-36 per cent for non-owner-occupied homes.

From 2023, tax on annual income in excess of $500,000 will be raised from 22 per cent to 23-24 per cent.

In addition, higher taxation rates of 220 per cent will apply for the portion of open market value for luxury cars in excess of $80,000.

Analysts see real estate stocks such as City Development, which counts The Residences at W Singapore Sentosa Cove among its properties, and other high-end developers like UOL taking a hit if the higher taxation rates start weighing on the wealthy.

Others say the taxes on cars will affect names such as Jardine Cycle & Carriage, which owns showrooms.

The increase in income tax rates for top earners could dampen the risk and investment appetites of some clients of the wealth management units of DBS Group, OCBC and UOB.

On the other hand, Maybank analysts point out that additional jobs and business support given to firms most pressured by Covid-19 could ease the banks' non-performing loans, while funding support for local mergers and acquisitions could lead to higher advisory and capital market fees. This could lend further support to the banks' earnings.

Carbon tax

Carbon taxes will be raised from $5 per tonne to $25 in 2024, $45 in 2026, and $50-$80 by 2030.

The hardest-hit companies are big entities, especially companies operating oil refineries and power generation stations. Emissions-heavy companies such as Singapore Airlines could also be affected negatively.

Conversely, companies such as Sembcorp Industries and Keppel Corp will benefit from their early push to reduce carbon emissions.

DBS sees ComfortDelGro potentially snagging more electric vehicle (EV) tenders in the future as Singapore continues to pursue its EV ambitions, while ST Engineering could also benefit given its ready suite of EV charging stations.

Higher taxi, train and bus ridership could benefit public transport operator ComfortDelGro, given that no additional carbon taxes are being imposed on the use of petrol, diesel and compressed natural gas, Maybank said.

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