KUALA LUMPUR, Malaysia (June 29): Given heightened macro risks in terms of Malaysia’s fiscal position and downside bias in banks’ earnings due to the loan repayment moratorium announced under the country’s RM150 billion package to help citizens whose livelihoods had been affected by the nation’s Covid-19-driven crisis, Kenanga Investment Bank Bhd reduced its end-2021 target for the FBM KLCI to 1,575 from 1,710 previously. With only RM10 billion to be directly funded by the federal government’s budget, Kenanga analyst Koh Soon Huat wrote in a note today that the 2021 budget deficit is likely to widen to its highest-ever level of RM105 billion, representing 6.9% of Malaysia’s gross domestic product (GDP), up from 6.3 percent previously.
“We believe there is a good likelihood that the 60 percent statutory debt-to-GDP limit will be violated,” Koh added.
Meanwhile, the research team at UOB Kay Hian Private Ltd predicts a minimal reaction to banks’ potential modification losses as a result of the expansion of loan-repayment moratorium eligibility to all income levels, according to a note released today.
Market mood would be influenced more by the momentum of the country’s Covid-19 vaccination campaign, according to the research team, while keeping its KLCI target of 1,665 by the end of 2021.
“We estimate a neutral market reaction to the RM150 billion stimulus package known as PEMULIH,” the research team wrote, “although the widening of the loan moratorium extension may have a minor impact on banks’ earnings.”
At 3.23 p.m. on Bursa Malaysia, the 30-stock KLCI had gained 2.96 points, or 0.19 percent, to 1,547.67.
So far today, the index has traded between 1,541.72 and 1,548.88.
A day after extending the statewide total lockdown indefinitely to combat the Covid-19 outbreak, Prime Minister Tan Sri Muhyiddin Yassin unveiled the RM150 billion PEMULIH scheme, known as Pakej Perlindungan Rakyat dan Pemulihan Ekonomi, which comprises cash aid and wage subsidies.
On June 1, 2021, the current lockdown began.
The Prime Minister’s Office (PMO) announced on May 28, 2021, that the National Security Council (NSC) had decided to implement Phase 1 of the lockdown from June 1 to June 14, during which all industries are prohibited from operating except those listed by the NSC as “essential economic and service sectors.”
The lockdown was then extended till yesterday, according to news sources citing Senior Minister (Security) Datuk Seri Ismail Sabri Yaakob.
Following Muhyiddin’s introduction of PPN on June 15, 2021, it was reported on Sunday that the lockdown is now known as Phase 1 of the National Recovery Plan, or Pelan Pemulihan Negara (PPN).
News reports quoting the premier then stated that Phase 1 of PPN, which was supposed to end yesterday, had been postponed, though no new deadline was given.
According to reports, Muhyiddin said Phase 1 of PPN had to be extended since the number of daily new Covid-19 cases in the country had not fallen below the 4,000 required to continue to the next phase. Continue reading