• The Prihatin Rakyat Stimulus Package 2020, launched by PM Tan Sri Muhyiddin Yassin on 27 Mar 2020, will further shield the economy from the impact of the Covid-19 pandemic. It shall prevent businesses, especially the smaller ones, from going under, and salaried workers from losing their jobs, through no fault of their own. It shall help the rakyat, especially, day-wage workers, petty traders and those from the low-income group, tiding them through this difficult period.

• To strengthen the rakyat’s safety net during this very uncertain time, the package offers RM10bil allocation for Bantuan Prihatin Nasional (BPN) for one-off cash handouts comprising: (1) RM1,600 for those with a household income of 21 years old) with an income of 21 years old) with an income of RM2K–RM4K.

• There are also special allowances/payouts to medical frontliners, the movement control order (MCO) enforcers, students at institutions of higher learning (IPT), vulnerable individuals (i.e. senior citizens and children in shelter homes), civil servants, government pensioners and e-hailing drivers.

• To ease the cost of living, the discount for electricity bills has been raised from 15% under the first stimulus package to a range of 15% to 50%, up to a maximum usage of 600kW per month, resulting in the savings to users doubling to RM1.03bil from RM500mil under the first stimulus package. Also, the rakyat will enjoy free internet from 1 April 2020 until the end of the MCO period valued at RM600mil. There will be a 6-month rental waiver for the B40 group in the People's Housing Project (PPR), public housing under the KL City Hall (DBKL) and for state-owned premises (i.e. school cafeterias, nurseries).

• To provide lifelines to the construction sector, as well as generating multiplier effects across the economy, the package has added RM2bil for smallish public projects such as road and school upgrading, on top of the RM2bil allotted under the first stimulus package.

• An additional RM4.5bil (on top of the RM2bil under the first stimulus package) will be set aside to provide financing to SMEs and micro entrepreneurs at preferential rates under various schemes to ease their cash flows.

• Under a RM100bil initiative, banks will grant a moratorium of 6 months for SMEs and individual borrowers to defer repayments. The financial institutions will offer credit card borrowers the option to convert their outstanding balances to term loans and to reschedule and restructure corporate loans.

• The government will also provide a guarantee scheme totalling RM50bil with a coverage of 80% on working capital loans, to be administered by Danajamin.

• We maintain our end-2020 FBM KLCI target at 1,300pts based on 15x our 2020F earnings (growth of +1.8%). This is at a slight premium to the MSCI EM Index’s 10-year (2010–2019) average P/E of 13.3x given the presence of highly defensive (and hence high P/E) sectors, i.e. plantation and glove (with a combined weighting of 14%), in the FBM KLCI.

• As we are navigating the Covid-19 outbreak, oil price crash and delicate political situation locally, we pick defensive names such as Tenaga Nasional, Digi.Com and Kossan Rubber. To position ourselves beyond these air pockets, we pick a mixed bag of fundamentally strong large- and mid-cap stocks that have been sold down indiscriminately such as Maybank, RHB Bank, Sime Darby, Sunway, IOI Properties, Guan Chong and YTL Hospitality REIT.

Source: AmInvest Research - 30 Mar 2020