THERE are two issues that investors need to come in terms with following outcome of the Pfizer and BioNTech COVID-19 vaccine trial success.
Firstly, while this is a positive development, some questions and concerns remain, including whether the vaccine can prevent severe disease or complications or how long it will protect against infection, and how well it will work in the elderly.
Moreover, as pointed out by CGS-CIMB Research, the required safety data for the vaccine will only be made available later this month, and the companies have yet to submit their data for peer review by other scientists – a key step in determining the quality of the results.
“Also, the vaccine’s complex and super-cold storage requirements are an obstacle and may impact when and where it is available in rural areas or poor countries where resources are tight,” shared head of research Ivy Ng Lee Fang in a strategic note.
“Based on current projections, the companies expect to produce up to 50 million vaccine doses globally in 2020 and up to 1.3 billion doses in 2021.”
Secondly, the vaccine discovery could be a signal that the worst may be over in terms of the ongoing COVID-19 pandemic.
This is likely to prompt investors to take profit on COVID-19 beneficiary stocks (ie gloves and technology sectors) which have done extremely well in terms of share price performances year-to-date and switch to COVID-19 recovery plays (banks, airlines, airports, retailers, gaming, media) as their share prices have been significantly dented by movement restrictions.
However, CGS-CIMB Research cautioned that the FBM KLCI had rallied 50.75 points or 3.33% yesterday (Nov 10 to 1,575 pts on the back of the vaccine discovery development, suggesting that market has partially priced in this positive news.
“We are of the view that the sustainability of this rally will depend on the progress of the various vaccines and their availability in Malaysia,” opined Ng.
According to news reports, Malaysia is in the final stages of negotiations to participate in the COVID-19 Global Vaccine Access (Covax) Facility.
The ceiling price set for the vaccine offered to Malaysia under the Covax Facility is US$21 (RM87.50) each.
“(However), this positive news flow is partially offset by political uncertainty and concerns of weaker earnings in 4Q CY2020 as Malaysia expanded its conditional movement control order to nine of its 13 states (Nov 9 to Dec 6) due to record-high new COVID-19 cases last Friday,” suggested Ng.
All-in-all, CGS-CIMB Research reiterated its end-2020 FBM KLCI target of 1,520 (16 times FY 2021F price-to-earnings ratio) with Public Bank Bhd, Tenaga Nasional Bhd and Malaysian Pacific Industries Bhd as its top picks. – Nov 11, 2020