With Malaysia’s fully vaccinated adult population at 83%, and at the current vaccination rate of 0.8% of population/day (~250k jabs/day), Macquarie Equities Research (MQ Research) expects that the 90% threshold would likely be reached by mid-October except for other states such as Kedah and Perak, among others. MQ Research notes that the hospitalization rate has been on a downtrend since early August though it remains cautious. It also thinks that a safe and sustainable economic reopening would be a major catalyst for corporate earnings, highlighting companies such as RHB Bank and Telekom as its top picks.

Restrictions continue to ease, interstate travel up next

• Over the past week, mobility restrictions continued to ease, with restaurants, convenience stores, mini markets, and petrol stations amongst others now permitted to operate from between 6am to midnight.

•  The government aims to lift the ban on interstate travel once 90% of adults are fully vaccinated. Given asymmetrical vaccination rates across different states, however (see Fig 3), there is some ambiguity regarding whether states with lagging vaccination rates will be reopened simultaneously. Based on current vaccination rates, all states except Kedah, Perak, Sabah and Terengganu (Fig 1) would surpass the 90% mark in 30 days. Currently, 83% of adults in Malaysia are fully vaccinated, with 90% expected to be fully vaccinated by mid-Oct.

• Vaccination rate rose slightly to 0.8% of population (~260k jabs/day). MQ Research believes this is due to two reasons: 1) most easing measures mandate full vaccination to enjoy (e.g. dining-in at restaurants), which is incentivising previously hesitant individuals to get vaccinated, 2) vaccinations have recently been made available to under-18 year-olds.

Increased mobility hasn’t driven up hospitalisations, for now

• As restrictions continue to be eased, mobility has rebounded rapidly. Nationwide MySejahtera app (Malaysia’s contact tracing app) check-ins by unique locations have recovered to 92% of 2021’s peak. Crucially, this has not translated to increased hospitalisation for the time being (Fig 2), which in fact, has been on the downtrend since early-Aug. While the trend is thus far encouraging, MQ Research remains cautious, as infections (and the corresponding hospitalisations) tend to lag mobility recovery by 2-3 weeks.

So Far, So Good

• A safe and sustainable economic reopening would be a major catalyst for the Malaysian economy and equities market. Not only will it be a tailwind for broader corporate earnings, but it would also de-escalate the risk of further policy overreaction by the government (e.g. interest waivers, windfall tax).

• Nonetheless, it will still take 2-3 weeks to properly assess if vaccinations are sufficient to blunt the worst effects of another spike in infections. The timing coincides with the upcoming Budget 2022 announcement (end-Oct), which remains a key risk junction for policies. MQ Research’s economic reopening plays are RHB Bank, Telekom Malaysia, and Petronas Chemicals; MQ Research remains cautious on international border reopening beneficiaries (aviation/tourism) that will have a longer and more volatile path to recovery.

Source: Macquarie Research - 29 Sept 2021