( Kuala Lumpur, 13 Apr 2020 ) As the market expects the MCO ( Movement Control Order ) to be extended twice, analysts foresee that a two-week extension of the management period will exacerbate the downside risks of the economy. It is expected that the degree of economic contraction will deepen by 2% to negative growth of 4.3%. Save the economy. Prime Minister YAB Tan Sri Dato’ Haji Muhyiddin bin Haji Mohd. Yassin announced last week to extend the operation control order again for 2 weeks to April 28. Hong Leong Research was not surprised by this. The main reason is that since the implementation of the self-regulation order, there are still more than 100 new cases of coronavirus daily It is believed that the administrative order may only be further relaxed after the number of new cases continues to fall below 50.
"However, we have seen some positive signs. Since the epidemic peaked on April 3, new cases have shown signs of slowing down. We predict that the coronary disease epidemic may be in May (first week or second week) Weaken to a manageable level. " Hong Leong Research said that with the extension of the executive order, the annual GDP target was lowered by 2%, from the original contraction of 2% to 4%, mainly due to the slow pace of restarting economic activities. "Affected by the peak of the epidemic, we believe that the economy will fall into the bottom in the second quarter and will gradually improve at the end of the year." CIMB Research also agreed that the annual GDP target was reduced by 2%, from the original 2.3% contraction to 4.3% contraction. "If the non-government decides to allow certain areas to restart in stages, the actual reduction may be an additional 0.6%." The bank said that the government has so far announced the RM260 billion economic revitalization package, which includes deferred loan repayment, commercial credit, and employee provident fund (EPF) withdrawals, etc., to assist individuals and businesses through the management period, but the impact of economic shutdown may be It is necessary for the government to release further policies and even respond to targeted assistance measures. Statistics from the Malaysian Bureau of Statistics show that more than half of the nationals have less than 2 months of deposits to deal with emergency shocks, of which self-employment and freelancers have the greatest impact.
This year may cut interest rates by another 0.75% Based on the above factors, CIMB Research expects the National Bank to cut interest rates by 50 basis points in May and further cut interest rates by 25 basis points in the second half of the year, slightly higher than the 50 basis points estimated by Hong Leong Research. On the other hand, CIMB Research said that with the second phase of the administrative order to increase the business area to the construction engineering, machinery and equipment field, and even certain auto industry activities will help to reduce losses, but not allowed to operate in the field suffered The loss will further expand, mainly because government assistance is not sufficient to cover the operating costs of the additional shutdown period. "We believe that the travel regulations will have the lowest impact on the telecommunications, public utilities, planting, gloves and catering industries, but gaming, aviation, airports, theme park operators, entertainment venues, industries, construction and retail and other tourism-related sectors will have the most impact. Bank profitability may also be affected by the Bank of China's interest rate cut by another 75 basis points and the potential rise in credit costs. " The bank predicts that at least 50% of listed companies (excluding banks) in the FTSE Composite Index will be directly and indirectly affected by the bank's management order, which may bring downside risks to the annual FTSE Composite Index earnings growth of 1.6%. "We may adjust our profit target, so we temporarily maintain the FTSE KLCI 1449 target at the end of the year."
KLCI is expected to show "W" trend In contrast, Hong Leong Research is pessimistic. Although the FTSE KLCI rebounded 11.3% from the low of 1220 points on March 19, it may be worse than the global financial crisis because of the coronary disease epidemic Forever, it is expected that the FTSE KLCI will show a "W-shaped" trend and bottom out between 1089 points and 1029 points. "We predict that the management period will be extended again, the May financial report and the first quarter GDP data will be weaker than expected, and the renewed trade war between China and the United States will be the main factor that causes the stock market to bottom. We maintain the stock market's expectations of W-type development. The FTSE KLCI is forecasting a year-end target of 1350 points. "
**Info & Image are taken online
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