KUALA LUMPUR, May 31 — Despite heading for some market headwinds ahead of the two-week lockdown, the local equity market may witness positive buying momentum on technology and shipping counters with global links as well as personal protective equipment (PPE) related counters.
Brokerage firm Malacca Securities Sdn Bhd said in a note today these were among the local counters that could get traders’ attention under the movement control order (MCO) 4.0 or MCO 3.0++.
Consumer, logistics and telecommunications may also benefit from the movement restrictions and heightened e-commerce activities on the other hand.
MIDF Research said the economic impact will be on the pace of growth but expected its trajectory to remain upward.
“We maintain the FTSE Bursa Malaysia KLCI (FBM KLCI) year-end target at 1,700 points with a buy on weakness stance,” it said, adding that there would be some short-term negative sentiment following the MCO announcement.
As such, it is cognizant of the fact that markets will likely be volatile at the current juncture.
Notwithstanding this, we expect MCO 4.0 not to alter the trajectory of Malaysia’s economic recovery or the trajectory of the FBM KLCI.
The research house, which is part of MIDF Amanah Investment Bank Bhd, remained sanguine for the remainder of calendar year 2021 (CY2021).
“We expect that CY2021 will see a recovery in the economy (albeit at a more moderate pace now). Furthermore, we believe that the management of these headwinds will be better given the experience governments and regulators have on dealing with the pandemic, coupled to the expected acceleration of the vaccination programme,” it told Bernama.
Also maintaining its FBM KLCI year-end target of 1,700 is Kenanga Investment Bank Bhd.
“We view these lockdown measures as temporary setbacks with limited impacts that are necessary in order to quell the spread and restore some progress in Covid-19 management.
“With additional precautions taken and vaccinations progressing more rapidly, chances are better that the current worrying rate of infection can be brought under control and we should see this lockdown easing as we draw closer towards the second half of 2021,” it said.
The investment bank remained optimistic of a better second half and recommended investors to accumulate on weakness. It maintains its 1,710 year-end target for the FBM KLCI.
GDP expectations
Meanwhile, Public Investment Bank Bhd had previously highlighted that a potential two-week lockdown in the Klang Valley could have shaved 0.8 per cent off gross domestic product (GDP) growth expectations.
This, it said, is also premised on the likely allowance of five significant sectors (~50 per cent of economy) to operate normally (manufacturing, services, agriculture, construction and trade) albeit with more stringent standard operating procedures (SOPs) being observed.
“Considering that the Klang Valley makes up about 40 per cent of the nation’s domestic output, and a full lockdown now extended to 100 per cent of the country, we reckon the economic damage will be more or less the same,” it said.
The investment bank noted that MCO 1.0 is estimated to have cost the economy RM2 billion per day, with MCO 2.0 at RM300 million per day.
MCO 4.0/3.0++ may see that hit widen to between RM1.0 billion and RM1.5 billion per day.
“While a lot more severe than MCO 2.0, the lockdown suggested for MCO 3.0++ is not as draconian as the shutdown seen in MCO 1.0.”
Prime Minister Tan Sri Muhyiddin Yassin announced last Friday that the nation will go back to a full lockdown for two weeks from June 1-14, whereby all economic and social sectors will shut down during the period except for the essential ones.
MCO 4.0 is similar to MCO 1.0 as movement restrictions have been tightened, but slightly different as essential sectors are allowed to operate.
Light at the end of the tunnel
AmInvestment Bank said that thanks to the availability of effective vaccines, as of today, the people live in a much better world as compared with a year ago when the pandemic first started.
“We are no longer grappling in the dark but we are already seeing the light at the end of the tunnel. The world as a whole, ourselves included, has a strategy, i.e. vaccination of the population towards herd immunity.
“Already, the strategy has borne fruit in a handful of developed nations.
For Malaysia, the herd immunity target by February 2022 (which is nine months from now) has not changed, although the consensus view is that there is much room for the vaccination programme to improve, particularly, in terms of speed,” it said.
AmInvestment said while a lockdown is damaging to the economy, Malaysia should consider its impact beyond the lockdown period itself (be it two weeks, four weeks, etc.).
If the lockdown is effective in breaking the chain of the Covid-19 infections, the economy can reopen on a clean slate thereafter. — Bernama
