The Prime Minister announced a return to a total lockdown similar to MCO1.0 with only essential economic and service sectors allowed to operate for two weeks from 1 – 14 June. Subject to the Health Ministry’s assessment on progress made in curbing the infection, this lockdown is expected to transition into subsequent phases thereafter with restrictions progressively eased. Assuming this being the case, the economic impact should be less adverse than last year’s MCO1.0 which lasted 46 days from 18 March – 3 May 2020 (before transitioning to CMCO and RMCO). Brace for some market weakness ahead, which we view as a buying opportunity. We stick with our 1710 year-end target for the FBMKLCI.

17 essential services allowed to operate: At a press conference yesterday, Senior Minister (Security) Datuk Seri Ismail Sabri Yaakob announced 17 essential sectors that were allowed to operate covering those in F&B, basic utilities services, health & medical care services, transport and ports, banking & finance, telecommunications (including IT and E-commerce), construction (but limited only to critical activities), O&G and delivery logistics.

Manufacturing and manufacturing related services allowed to operate at limited workforce capacities: In a separate media release, the Ministry of International Trade and Industry (MITI) disclosed a list of manufacturing and manufacturing-related services (MRS) that are allowed to operate subject to obtaining an approval letter from the Ministry. Companies that are outside of MITI’s scope are required to refer to relevant ministries regulating their sectors or the National Security Council (MKN). For manufacturers and manufacturing related services, the current SOP on workforce capacity is either 60% or for those allowed to operate only on warm idle mode, the restriction is 10%.

Source: Kenanga Research - 31 May 2021