PETALING JAYA: The impact from the extension of the first phase of the lockdown until June 28 is expected to be mitigated by greater leniency in sectors allowed to operate and support from the Pemerkasa+ aid package, according to CGS-CIMB.
“However, the extension will raise the risk of Q2’21 corporate earnings disappointment for gaming, retail, auto, REIT, property, construction and tourism-related plays,” it said in a report today.
On the flip side, the research house views utilities and export-oriented sectors such as tech, glove makers, petrochemicals, plantations as least affected as they are allowed to operate during the full movement control order.
For 2021, it has kept its GDP forecast of 4.4%, which incorporate the three phases of lockdown, a four week-long second phase that allows reopening of economic sectors that do not involve large gatherings and third phase that would entail the resumption of almost all economic activities.
With that the research house has reiterated its year-end target of 1,709 points for FBM KLCI.
CGS-CIMB pointed out that political developments are also in focus after the king summoned political leaders for meetings at the palace last week. It noted that the next date to watch is June 16, where the king is expected to convene a special conference of the rulers.
Meanwhile, TA Research reiterated its view that investors should not dwell too much on the current Covid-19 situation and shy away from the equity market as the dark clouds are expected to disperse by this October with the arrival of more vaccines locally from next month onwards and steady vaccination progress with the opening up of more vaccination centres and authorisation of private clinics to conduct vaccinations. By end of this year, more vaccines and oral drugs for Covid-19 are expected to hit the global markets.
“Of course, the extension of full lockdown until June 28 will have economic implications as we expect each day of lockdown to cause a loss of RM1.5 billion in daily output. It will lower our current GDP growth assumption of 4.2% for 2021 to 2.9% if it lasts until June 28 or 2.6% if it ends on June 30,” TA said.
However, with the ongoing vaccinations and much of the Covid-19 infections contained in the next few months, it said domestic politics is a major uncertainty holding back investors, especially foreigners, but it has seen the worse in terms of fragmented politics and electoral volatility, which can lead to a more “win-win” alliance among political parties in the next general election.
“Thus, it is still worthwhile to pick up undervalued blue chips and economic recovery plays in the banking, gaming and property sectors,” said TA.
