DRAWING comparison with the UK, there is reason for investors to be upbeat about growth outlook and “being back on recovery path” once the economy re-opens.
Although the resurgence of COVID-19 cases in the UK is among the highest in the world, this has not led to rise in mortality in cases, according to MIDF Research.
“In fact, it is among the lowest in the world. Based on studies, we understand that while the Delta variant is more infectious and deadly, vaccination will moderate the symptoms toward asymptomatic (ie no symptoms),” observed MIDF Research’s head Imran Yassin Yusof in a thematic report entitled “Vaccination Really is Key to Re-opening”.
“Similarly, looking at the hospitalisation and ICU (intensive care unit) rate, we also observed that while the incidence rate has increased, the rate remains fairly stable (with a slight uptick).”
Back home, while Malaysia’s vaccination rate is among the best in the world, its daily new COVID-19 cases is also among the highest at the moment.
Based on available data, Malaysia is vaccinating 12,156 people per one million population, so much so that the Government is now targeting 100% adult population of Malaysia to be inoculated by October from 1Q CY2022 previously.
“Besides the fact that the Delta variant is more infectious than the previous variants, we also believe that this was due to increase testing,” noted MIDF Research.
“One of the common features though is that more than 90% of the new cases reported in Malaysia are Category 1 and 2, ie no or mild symptoms. It is even more imperative that the Malaysian population gets vaccinated given the Director-General of Health has revealed that circa 92% of the new cases involved those unvaccinated.”
Again using the UK as its basis of comparison, MIDF Research foresees the prospect of an MCO (movement control order)-free Malaysia “even before the final quarter of this year” as a possibility. The UK lifted all COVID-19 restrictions on July 19 with 54.4% of its population fully vaccinated.
“Under this scenario, we expect the equity market to regain its mean valuation range as early as in September,” projected the research house.
“Moreover, we can expect to see pent-up macro demand upon the economic re-opening. A buoyant recovery in the final quarter would help to lend a further lift to equity market sentiment as well as valuation.”
Based on 10-year historical data, the FBM KLCI generally trades at forward year PER (price-to-earnings ratio) of between 14.5 times and 15.5 times. As the FBM KLCI 2022 earnings is forecasted at 109.4 points, the equity benchmark is therefore to range between 1,580 points and 1,700 points this year.
“The bargain hunters are arguably those who are seeing the glass half full, thus our sanguinity on the medium-term direction of the market,” envisages MIDF Research.
“While the MCO remains in place as the number of COVID-19 infection and related death cases in Malaysia are still high, we expect the high vaccination rate (among highest per capita in the world) to help turn the tide rather swiftly.” – July 28, 2021
