Highlights

Yhprum's Law: Everything That Can Work, Will Work

• As 2022 begins, we want to highlight what could go right this year. With the economic recovery slowly but surely taking place, we see three things that could make 2022 a turnaround year. Nevertheless, there are three key risks that may affect Malaysia’s equity market.

What could go right

1. Strong economic resilience as Malaysia’s vaccination rate is on par with G7 countries

• Malaysia’s population with full vaccination against Covid-19 has reached 78.3% as of 24 Dec. This is much higher than the world average of 48.2%. As compared to G7 countries, Malaysia stands tall as it is ranked No.2 after Japan. Malaysia’s rate of fully vaccinated population is ahead of Canada (77%), Italy (74%), France (73%), Germany (70%), the UK (69%) and the US (61%). See Exhibit 1 for details.

• Regionally, Malaysia’s fully vaccinated rate is ranked 4th out of 10 Southeast Asia countries. This is a good indicator that Malaysia should fare relatively better against most Southeast Asia against Covid-19 (including Omicron). See Exhibit 2 for details. The high vaccination rate should translate into a low hospitalization rate. Proactive measures to provide booster shots should help to limit Omicron cases’ surge and hospitalization.

2. Expect no lockdown in 2022 as Omicron hospitalization rate is low

• We expect there will be no large-scale lockdown in 2022 even if Omicron causes a significant increase in Covid-19 cases. According to The Guardian in a 24 Dec report, people with Omicron are estimated to be 50% to 70% less likely to require admission to hospital, according to a study by the UK Health Security Agency (UKHSA). This reinforced a statement by the WHO Regional Office for Africa statement on 9 Dec which said, “… emerging data from South Africa indicates that Omicron may cause less severe illness. Data which looked at hospitalizations across South Africa between 14 Nov and 4 Dec found that ICU occupancy was only 6.3 %, which is very low compared with the same period when the country was facing the peak linked to the Delta variant in July”. Still, more data is needed before a conclusion can be reached on the severity of illness caused by Omicron. On 22 Dec, The Washington Post reported that “Dr Anthony Fauci reassured those Americans who are vaccinated and boosted that they would have considerable protection from serious illness”. Dr Fauci is the chief medical advisor to the US president.

• As shown in Exhibits 3 and 4 for South Africa, there was no surge in deaths caused by Covid-19 despite a huge increase in the number of new cases. The same trend is noticed in the UK where Covid deaths rose at a much lower rate compared to the surge in new cases (Exhibits 5 and 6). As it is, the Malaysia government has announced that two more states – Sarawak and Kelantan – will transition to Phase 4 of the National Recovery Plan (NRP) effective today 3 Jan 2022. This means all states in Malaysia are now in Phase 4 (the last phase of NRP).

3. Consumer Confidence to Remain High in 2022

• On 22 Oct, the Malaysian Institute of Economic Research (MIER) announced that the Consumer Sentiment Index (CSI) has improved to 101.7, exceeding the optimism threshold after three years. The MIER further elaborated that “notwithstanding the still-high inflationary outlook, financial and employment expectations are beefing up consumer shopping plans in the coming months”. We are positive on this and believe that this optimism can be sustained in 2022. Coupled with higher disposable income, a better job market and broader economic recovery, this will be supportive to private consumption.

Source: AmInvest Research - 3 Jan 2022