THE relaxation of movement control measures with four key states (Selangor, Johor, Penang and Kuala Lumpur) reverting from the movement control order (MCO) to conditional MCO (CMCO) from tomorrow (March 5) to 18 should be viewed positively by the market.
Not only that this reduces concerns over corporate earnings risk, it coincides with the start of the COVID-19 vaccination drive which is seen as positive to reduce the risk of new infections over time.
“We are of the view that a successful vaccination programme will re-rate and shift interest to stocks that will benefit from the economic recovery,” commented CGS-CIMB Research head Ivy Ng Lee Fang in a strategy report.
“Investors will likely closely follow the arrival of vaccine supplies and achievement of vaccination coverage set out under each phase of the programme against its target.”
To re-cap, the Government had earlier indicated that it expects 2.7 million doses of the Pfizer vaccines to arrive in 1H 2021.
Meanwhile, the first batch of China’s Sinovac vaccine which will be processed into more than 300,000 doses arrived on Feb 27 while on March 2.
“In total, we estimate Malaysia currently has 797,910 doses of COVID-19 vaccine to inoculate around 398,955 people (two doses required per pax),” projected Ng, noting that Malaysia has secured access to 66.7 million doses of COVID-19 vaccines from five producers.
Since the country started its vaccination drive on Feb 24, 53,827 people have received their first dose of the COVID-19 vaccine as of March 2.
“We believe that a successful execution of the National COVID-19 Immunisation Programme will be key to lifting market sentiment,” opined Ng while retaining the research house’s FBM KLCI target of 1,759 pts (12M forward price-to-earnings ratio of 16.2 times).
Another push factor will probably be the decision by Bank Negara Malaysia’s Monetary Policy Committee (MPC) today to maintain the overnight policy rate (OPR) at 1.75% regardless of the growth outlook which remains subject to downside risks.
This, according to the central bank, stems mainly from ongoing uncertainties in developments related to the pandemic, and potential challenges that might affect the roll-out of vaccines both globally and domestically.
“The MPC considers the stance of monetary policy to be appropriate and accommodative,” BNM pointed out.
“Given the uncertainties surrounding the pandemic, the stance of monetary policy going forward will continue to be determined by new data and information, and their implications on the overall outlook for inflation and domestic growth.” – March 4, 2021
