KUALA LUMPUR, March 14 — Investors will continue to gauge the impact of the Covid-19 pandemic next week amid fears of recession and lower crude oil prices while they await details on possible adjustments to the existing RM20 billion economic stimulus package.
The “triple whammy” effects would also result in lower-than-expected gross domestic product (GDP) growth and the doubling of countries’ deficits, analysts said.
Yesterday evening, Prime Minister Tan Sri Muhyiddin Yassin announced a lower GDP growth projection of 3.6 per cent to 4.0 per cent for the country this year, down from the initial forecast of 4.8 per cent.
An analyst told Bernama that the global supply chain will continue to be disrupted due to the virus outbreak, while the benchmark Brent crude oil is expected to go down to US$20 per barrel, hence requiring the government to speed up the implementation of its fiscal stimulus plan.
Concurring with this view, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said that at this juncture, instilling confidence among investors is very critical.
“The government needs to speed up the implementation of the fiscal stimulus package so that domestic demand will continue to grow and offset the weaknesses from abroad. I foresee demand for safe-haven instruments such as bonds or sukuk to be the highly sought-after investment despite their lower yields.
“What matters now is the preservation of capital or investment principle. We will continue to see a shift in demand from risky assets such as equities to bonds or sukuk,” he said.
While the duration of the pandemic is still unknown, Mohd Afzanizam noted the number of recovery cases globally stood at 66,251 cases, or 55 per cent out of the 120,772 confirmed cases across 114 countries.
Malaysia recorded 39 new Covid-19 cases yesterday, raising the tally to 197 cases.
“That’s quite decent and therefore, we cannot rule out the V-shape recovery taking place. The sharp fall in equity prices has inadvertently led to values emerging for the high quality stocks.
“So perhaps, there are buying opportunities too, especially for those who have a longer-term investment horizon,” he said, adding that there could be another round of rate cut by Bank Negara Malaysia.
He said next week, the composite index should hover around 1,340 to 1,350 with the next support level being at 1,247 points.
On the global charts, the Dow Jones, S&P 500 and Nasdaq were down about 10 per cent on Thursday, while some emerging markets indices declined and triggered circuit breakers, including India, Thailand and the Philippines.
The Dow sank 9.99 per cent while the S&P 500 declined 9.51 per cent—their steepest daily fall since 1987, roiled by the overnight selldown on Wall Street after the World Health Organisation declared Covid-19 a global pandemic.
Back home, amid the volatile trading, the FBM KLCI declined by the most points (97.20) yesterday morning before closing the day’s trading 74.68 points lower at 1,344.75 (the last level seen in July 2010), buffered by local institutional buying, hence no trading was halted.
To recap, Bursa Malaysia implemented its circuit breaker in March 2002, designed to trigger automatically when the benchmark index records a 10 per cent decline from the previous day’s closing level.
The global Covid-19 fears have also prompted the US Federal Reserve to step in and announce the move to pump in up to US$1.5 trillion liquidity into the financial system to calm the markets.
The trading week just ended also saw selling pressure in key index stocks dragging the local market, led by the industrial products and services, small cap, construction, financial and plantation counters.
As for next week, investors, both local and foreign, would be focusing on the Malaysian government’s new economic policies ahead of the inaugural Economic Action Council meeting, aimed at addressing economic woes faced by the country.
On a Friday-to-Friday basis, the FBM KLCI erased 138.35 points to 1,344.75 from 1,483.10 previously.
On the scoreboard, the FBM Emas Index gave up 1,118.56 points to 9,326.41, the FBMT 100 Index decreased 1,055.27 points to 9,218.96 and the FBM Emas Shariah Index depreciated 1,135.36 points to 9,984.99.
The FBM 70 declined 1,707.35 points to 11,010.23 and the FBM ACE Index contracted 953.18 points to 4,291.99.
Sector-wise, the Financial Services Index reduced 1,514.22 points to 12,822.34, the Industrial Products and Services Index inched down 24.56 points to 110.67 and the Plantation Index was 885.53 points weaker at 5,847.51.
Weekly turnover rose to 25.01 billion units worth RM17.67 billion from 15.85 billion units worth RM12.51 billion recorded in the previous week.
Main Market volume climbed to 18.12 billion shares valued at RM16.47 billion compared with 9.97 billion units worth RM11.31 billion .
Warrants turnover increased to 2.33 billion units worth RM353.72 million versus 2.04 billion units worth RM341.76 million.
The ACE Market volume declined to 4.64 billion shares valued at RM838.56 million from 3.83 billion shares worth RM852.22 million in the previous week. — Bernama
