KUALA LUMPUR, April 20 — Equities and other risk assets have seen a near-30 per cent rally from its March-lows as Covid-19 infection rates show signs of peaking in key epicentres.
In a research note today, Maybank Kim Eng said the rally is expected to continue in the coming months.
“While regional countries are on different parts of their epidemic curves, and equity valuations may look a bit stretched versus the incoming Covid-19 toll on activities and jobs in the second quarter, we think that it may be timely to consider positioning for an eventual market recovery,” it said.
It said that the ringgit could regain its appeal over the next three months.
On its fixed income outlook, the research house took a neutral stance on Malaysia.
“As external risks have subsided of late, investors have regained confidence to position for additional Bank Negara Malaysia rate. Our baseline view is a 50 basis points cut to the global financial crisis low of 2.00 per cent, but this should not be seen as a floor.
“We expect a dovish surprise from the central bank. Our end-2020 forecast remains at 2.80 per cent,” it said.
Meanwhile, the research house said the softer oil prices had led to worries over oil-related revenues.
“Every US$10 per barrel decline in oil price will reduce fiscal revenues by RM7 billion and raise the budget deficit to gross domestic value ratio by 45 basis points.
“Given the nature of the pandemic-led crisis — which saw huge stimulus plans, leading to issuance of longer-term fiscal debt — cash crunch among firms, sovereign or corporate credit risks may take longer to fade than in previous crises,” it said.
Maybank Kim Eng added that as economic activities resumes, technology trend is likely resume its strong traction as the pandemic saw a surge in demand for video conferencing, cloud computing and information technology (IT) supplies, including laptops and printers.
“Prior to Covid-19 outbreak, the tech recovery was already gaining traction but was overshadowed by oil price plunge and Covid-19 pandemic,” it added. — Bernama
