We modelled Malaysia’s vaccine supply and demand trajectories. On supply, if JKJAV’s July-Aug vaccination targets are met, the path to 80% herd immunity seems attainable. However, signups (currently at 55% of population) needs to pick up at a daily rate of 0.14% from now till year end to fulfil the demand side of the equation. If signups remains static at current level, supply will soon outpace demand by mid-Sept. As supply is already ramping up exponentially, the focus should eventually shift to closing the demand “vax gap” to ensure herd immunity (and some normalcy) can be achieved by year end.

Exponential ramp up. Despite an initial slow start since the National Covid-19 Immunisation Program (or its Malay acronym taskforce “JKJAV”) began in Feb, the pace of vaccination has now ramped up significantly. Average daily vaccination has risen from 22-25k in Mar-Apr to 50k in May and 169k in June, while the MTD-July sum stands at 326k. As of 14 July, 26.5% in Malaysia have received at least 1 vaccine dose (fully vaxed: 12.3%), placing it at 3rd spot within the 10-nation ASEAN. While the lag behind Singapore is understandable given its smaller geography and population, the gap against Cambodia can perhaps be explained by differences in vaccine composition (Cambodia has >90% reliance on Sino vaccines while Malaysia has a more diverse portfolio).

Vaccination trajectory. Based on 1Q21 population of 32.75m and assuming a 2- dose regimen, this works out to 52.4m jabs needed to hit Malaysia’s 80% herd immunity goal. We modelled Malaysia’s vaccination trajectory based on the targets disclosed by Coordinating Minister of JKJAV, “KJ”. This assumes 390k average daily jabs in July, 434k in Aug before tapering to 210-215k in Sept-Oct, 131k in Nov and 81k in Dec. If these targets are met, achieving herd immunity by year end isn’t a far cry (intersection between the solid dark blue line and dotted red line in Figure #3).

Beating recent targets offer some buffer... Notably, the critical targets are in July and Aug which is when inoculation is expected to peak. Optimistic as it may sound, we believe July’s target of 390k jabs per day (+130% MoM) is attainable, seeing that daily numbers have surpassed the 400k mark for the past 3 consecutive days. Recall that last month’s target of 150k was trumped, chalking at 169k. With the significant rise in vaccination, daily jabs in July have consistently exceeded (by a far margin) the minimum threshold needed to hit herd immunity by year end (see Figure #4). This has also resulted in the minimum threshold line (red line) tilting downwards since lateJune. Intuitively, this implies Malaysia now has some “buffers”; i.e. even if some delays occur, hitting herd immunity by year end should remain pretty much intact.

…but signups must pick up. While the exponential surge in vaccination is encouraging, another issue may soon surface: supply will exceed demand. Based on the projected vaccination trajectory (supply) vs demand, we estimate that almost everyone that’s already signed up on MySejahtera will be inoculated by mid-Sept (see Figure #3, intersection between the solid dark blue line and dotted blue line). Sounds good, but not entirely, as current signups on MySejahtera only form 55% of population (as of 11 July) vs the herd immunity goal of 80%. In short, while vaccine administrating capabilities are there, it may soon reach a point where there are not enough signups for vaxing to hit 80%.

The vax gap. Graphically, referring to Figure #5, JKJAV needs to narrow the gap between the dotted red and blue lines, or what we term “the vax gap”. We calculate Malaysia’s vax gap to now stand at 25% of population (i.e. 80% herd immunity target minus 55% sign up rate). By our estimates, signups on MySejahtera would need to increase by 0.14% (of population) daily from now till year end to reach 80%. We believe this pace isn’t out of reach as historical signups have risen at a higher average daily rate of 0.38% (of population). Closing the vax gap would complete the entire vaccine demand-supply equation needed for herd immunity to be achieved by year end (Figure #6).

Practical considerations. While our vaccine demand-supply model alludes it is possible for herd immunity to be attained by year end, we are cognisant on the real world challenges to this. On the supply side, these include “vaccine nationalism” (e.g. Thailand considering regulating AZ vax exports) and possible supply squeeze if other nations implement a 3rd booster jab. For demand, unless mandatory vaccination is enforced, closing the vax gap entirely would be tough due to anti vaxxer propaganda, alongside challenges in reaching out to rural folk and those not connected via smartphones.

Economic and market implications. Vaccination ramp up is crucial for Malaysia as it is one of the three thresholds needed to move up the reopening phases of its National Recovery Plan (NRP). With higher levels of inoculation, ICU and mortality rates should also ease amongst the infected, providing a much needed relief to the healthcare system. If this happens, absolute daily cases can perhaps take a lesser weightage in determining the transition along the NRP’s phases. For now, our base case assumes Malaysia will transition to Phase 2 in Aug and Phase 3 towards endSept/ early-Oct. We maintain our 2021 GDP forecast at 4.0% and KLCI target at 1,660 (16.5x PE).

Source: Hong Leong Investment Bank Research - 16 Jul 2021