Positive outlook likely for Malaysia’s equity market in 2021

The local market has rebounded sharply from its Covid-19-triggered steep depreciation, and has performed relatively better than its regional peers, largely thanks to the unprecedented government stimulus. — Bernama pic
The local market has rebounded sharply from its Covid-19-triggered steep depreciation, and has performed relatively better than its regional peers, largely thanks to the unprecedented government stimulus. — Bernama pic

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KUALA LUMPUR, Aug 26 — UOB Asset Management (Malaysia) Bhd expects that further government fiscal stimulus, with the central bank remaining accommodative, and continuous support from the retail investors will help drive the local equity market’s recovery into 2021.

Chief investment officer Francis Eng said the local market has rebounded sharply from its Covid-19-triggered steep depreciation, and has performed relatively better than its regional peers, largely thanks to the unprecedented government stimulus.

He also said strong participation from retail investors who sought better yield in equities rather than fixed deposits contributed to the market’s recovery.

“Compared to other investment options, equities are able to generate positive returns in the medium to long-term, leading to potential capital appreciation (for the investors).

“With interest rates likely to remain low for quite a long time — as it will take a while for us to fully recover from this pandemic — (retail investors will look at) other asset classes including equity very seriously for a pick-up in returns.

“As we get to year-end, investors will look at 2021. If there are sufficient signs of a recovery, this will be another catalyst for the market,” he told a virtual media briefing on the Market Outlook for 2020 here today.

The government had introduced stimulus packages worth RM295 billion to spur the economy which had been seriously impacted by the Covid-19 crisis, which has also severely disrupted the global supply chain.

Meanwhile, Eng expects that there would be no further cut in the Overnight Policy Rate (OPR) by Bank Negara Malaysia (BNM), going forward, as it had been slashed to its record-low of 1.75 per cent in the previous meeting.

Hence, less pressure on interest rate margins could be anticipated going into 2021, he said.

Commenting on the possible rebound in margins for banks, Eng said that BNM has projected that the economy will recover in 2021, which would improve the banks’ fortunes.

On July 7, the central bank reduced the OPR to 1.75 per cent, and correspondingly, the ceiling and floor rates of the corridor of the OPR were reduced to 2.00 per cent and 1.50 per cent, respectively.

The MPC will hold its next meeting on September 10, and the last meeting for the year is scheduled for November 3, 2020. — Bernama

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