AT the outset, the latest targeted movement control order (MCO 3.0) is poised to have less adverse economic impact compared with its predecessors, the MCO 1.0 and MCO 2.0.
Yesterday (May 5), the Government announced that Kuala Lumpur, three districts in Johor, 14 sub-districts in Terengganu and one district in Perak will come under MCO from May 7 to 20.
They will be joining six Selangor districts which will go under MCO from today (May 6) to May 17.
Describing MCO 3.0 as likely to be less painful than past iterations, CGS-CIMB Research expects the daily economic losses to be lower than the near-nationwide MCO 2.0 (loss of RM300 mil/day) and marginally higher than the RM150 mil/day that it had imputed into its baseline scenario under conditional MCO (CMCO).
“The extension of wage subsidies and cash transfers to June 2021 as well as existing policy support (targeted repayment assistance, Employees Provident Fund [EPF] withdrawals and credit facilities) partially buffers the impact of the latest movement restrictions,” opined head of research Ivy Ng Lee Fang.
“Given the limited downside and our conservative assumptions on the recovery trajectory, we reiterate our GDP growth forecast of 5.7% in 2021F.”
Very broadly, CGS-CIMB Research expects the implementation of MCO 3.0 in selected states and districts and rising COVID-19 cases to likely pose some earnings risks to REIT players with exposure to hotel and shopping malls as well as tourism-related plays (Genting group) due to inter-district travel restrictions and a likely prolonged inter-state travel ban.
“The delay in the roll-out of the Phase 3 immunisation programme could impact the timeline of when the country can achieve herd immunity and reopen its borders,” cautioned CGS-CIMB Research.
“As such, this could dampen near-term sentiment and prompt investors to profit-take on recovery-play stocks (banks, auto, property, construction and tourism-related plays) on concerns of earnings risks in the near term, and switch to defensive plays (utilities, telco and glove makers).”
Nevertheless, the research house keeps its 2021 FBM KLCI target of 1,699 points. – May 6, 2021
Photo credit: Mukhriz Hazim @ Malaysiakini.com
