The Malaysian government announced yesterday that Malaysia’s full measure restriction order (MCO) that was due to end today (Monday, 28 June) will be extended until new Covid19 cases drop below 4,000 daily, 10% percent of the population has been vaccinated and intensive care unit (ICU) capacity has been eased. Ahead of additional stimulus measures to be announced this week, Macquarie Equities Research (MQ Research) expects there will be modest measures with blanket moratoria unlikely going to happen while foreseeing that lockdown to last for another two weeks or about 70 days in total. Read on for an excerpt of MQ Research’s report released this morning (Monday, 28 June).

Key Points

• Lockdown extended as Phase 2 criteria not met: less than 4k/day new infections and over 10% fully vaccinated. But slight loosening for F&B.
• Additional stimulus measures being considered by the government, to be announced in the next few days. MQ Research thinks blanket moratoria is unlikely.
• Positives: Vaccination pace continues to accelerate hitting T14-day avg of >200k/day and 24.2% of adults receiving at least one dose.

Infections Delay Phase 2

• The government has announced transition to Phase 2 of its movement control order (known as MCO 3.0) will be delayed until key criteria are met – less than 4k new cases per day and >10% fully vaccinated. Nonetheless, minor loosening for the F&B sector was allowed, with outlets allowed to operate from 6am-10pm going forward (previously: 8am-8pm). MQ Research expects the current stringent lockdown measures to last another two weeks, or about 70 days in total, as vaccinations continue to accelerate.

Stimulus Incoming, Expectations Low

• Additional stimulus measures will be announced by Monday/Tuesday (June 28/29), but MQ Research expects only modest measures. MQ Research expects the banks’ targeted repayment assistance schemes (that already cover ~15% of loans) should be sufficient and the risk of a blanket moratoria is very low, noting BNM’s explicit statement that such measures would not be repeated. MQ Research expects direct cash transfers from federal coffers may be limited, and the government will look for alternatives like retirement savings withdrawals (e.g. i-Sinar) for individuals and subsidised loans for SME’s (e.g. SRF).

Outlook

• Continued acceleration in vaccination rates remains a key bright spot amid the lockdowns. The government appears on track to increase cumulative administered vaccines to 21.6m by end-July, June is already ahead of plans.

Source: Macquarie Research - 28 Jun 2021