• As seen in other countries, the Covid-19 pandemic could be seeing ‘light at the end of the tunnel’ as citizens are being vaccinated. Similarly, we should be anticipating a similar scenario once Malaysia achieves herd immunity and business activities should return to normalcy by 2022.

• The government has unveiled the National Recovery Plan and the latest stimulus packages worth RM150bn, these should provide some clarity to position in the stock markets.

• We opine market players may look into the recovery theme, transportation and logistics, plastic manufacturers, technology and building material sectors.

Covid-19 status

• Subsiding Covid-19 cases globally… With the smooth rollout of the Covid-19 vaccination drive globally, cases have peaked out in the month of April-May; global daily cases have dropped from the peak around 900k to near to 300-400k recently.

• The Delta variant may be a concern. However, the recent Delta variant has been causing some concerns that another wave of Covid-19 could be emerging. Hence, we believe the SOP measures such as social distancing and facemask will be needed until herd immunity is achieved.
   
• …but local confirmed cases are still relatively high. Malaysia is being hit by another virus wave, which has brought the daily cases above the 9000 level at one point in May and subsided to around 5000-6000/day. As the infectivity rate is still relatively high and our government has imposed a lockdown since early June, which should slow down the local confirmed cases and ease the healthcare system.
   
• Malaysia in lockdown mode… The National Security Council has decided to impose a full lockdown until further notice. This lockdown has certainly spooked the market, as market participants thought the tightened measures during MCO3.0 were sufficient to battle the Covid-19 pandemic during the festive season.
   
•  …but impact should be less severe. Although there will be movement restrictions among all the sectors, the current lockdown is not as stringent as compared to MCO1.0. Selected industries under the “essential list” are able to operate with 60% of workforce vs. 50% during the MCO1.0. Hence, we believe the impact towards the economy will be less severe as compared to MCO1.0.
   
• Full steam on global vaccination efforts. We gathered that 23.1% or 1.8bn people in the world have been given Covid-19 vaccine. Based on that figure, we may anticipate business activities to restart gradually by 2H21 and hope to count on a fully operational mood by 2022.
   
• Covid-19 vaccine efforts by Malaysia. According to JKJAV, Malaysia has secured vaccines for nearly 110% of Malaysia’s population. More than 16.0m populations have registered for the Covid-19 vaccine and around 16.7% of the population has been given at least one dose. (Source: KKM 28th Jun)
   
• Crucial target of 80%. Based on the statement from the National Covid-19 Immunisation Programme, Minister Khairy Jamaluddin, believes that in order to limit the spread of Covid-19, a target of 80% of the population will need to be achieved. Again, we think prevention measures such as wearing of face masks and social distancing will remain to reduce the daily infections moving forward.

Economic review and outlook

• Stimulus packages since Covid-19 pandemic started. Our government has put in several efforts releasing stimulus packages since the start of the pandemic; translating to around RM380bn worth of stimulus packages to boost the economy. We expect that may cushion the downside risk going forward. In 1Q21, Malaysia GDP contracted -0.5% YoY and with the full lockdown being implemented in June, we believe the recovery might delay until 4Q21 onwards.
   
• PEMULIH stimulus package. PM has unveiled another RM150bn package amid the extended lockdown, which includes direct fiscal injection of RM10bn. PEMULIH financial stimulus aims to provide comprehensive assistance to the people through three main focuses – continuing the people’s agenda, supporting businesses and improving the national vaccination rate.
   
• Measures that might gather market’s attention. We believe under PEMULIH, some of the initiatives might provide trading impetus to the stock markets, namely (i) automatic loan moratorium for 6 months – which will be given to all consumers and micro SME borrowers, (ii) introduction of i-Citra, a withdrawing facility under EPF – EPF members can make withdrawals up to RM5,000 with a fixed payment of RM1,000 per month for 5 months, subject to their savings amount.
   
• Recovery in sight, but likely to be at a milder pace. In 2020, Malaysia’s GDP contracted by -5.6% YoY. Based on Bloomberg consensus, Malaysia’s GDP is forecasted to grow at a rate of 5.7% and 5.4% in 2021-22. Do note that in Malaysia MoF is projecting that the GDP to grow at 6.0-7.5% for 2021, underpinned by a broad based recovery in all sectors. However, in view of the current extension of the full lockdown, we do not rule out the possibilities of a potential downgrade in GDP numbers moving forward and it may translate to potential OPR cut by BNM

Source: Mplus Research - 30 Jun 2021