The week that was - Permai package, low interest, MAG revamp, chips demand

BANK Negara said the decision to hold interest rate at record low was “appropriate and accommodative, ” but said the overall outlook remained subject to “downside risks.”

RM15bil Permai package

MALAYSIA on Monday unveiled an additional RM15bil worth of stimulus, its fifth economic package in less than a year, as surging number of new Covid-19 cases prompted the government to re-introduce the movement control order (MCO) that has been expanded from Friday to all states except Sarawak.A nationwide state of emergency order has also been declared. Since March last year, the government had announced four economic stimulus packages worth RM305bil to combat the virus.

CGS-CIMB Research estimated the direct cash injection under the latest stimulus package at around RM2bil, or 0.1% of gross domestic product (GDP).

The extra spending seemed manageable, it said, especially with oil prices hovering at around US$56 a barrel versus Budget 2021 assumption of US$42 a barrel.

The price difference, the research firm estimated, could translate into an additional oil related revenue of RM4bil for the treasury.

Concerns are growing that the relative mild MCO measures this time around would need to be tighten and extended beyond the initial two-week period that will end on Jan 26.

In Kedah, Perak, Pahang, Terengganu, Perlis and Negri Sembilan, the two-week MCO period will begin from today until Feb 4.

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz on Tuesday said the MCO 2.0 was estimated to cost the country about RM600mil a day, but the fear is that some of the already badly-hit sectors in the economy, such as tourism and retail, may take much longer to recover.

Low interest rate

BANK Negara said the decision to hold interest rate at record low was “appropriate and accommodative, ” but said the overall outlook remained subject to “downside risks.”

The central bank expected the economy the resume its recovery from the second quarter onwards.

But the worrying trend in the rising number of new Covid-19 infections and the uncertainties over mass vaccinations programme may prompt policymakers to reassess their stance in the next meeting, scheduled for early March.

The FBM KLCI dropped below 1,600 points on Thursday, reflecting investors’ growing worries overt the pandemic.

With the overnight policy rate (OPR) already at a low of 1.75%, it was likely that the central bank had opted to reserve some monetary ammunition if the economy takes another turn for the worse. Most economists predict a 25 basis point cut on the OPR by May.

MAG to complete revamp

MALAYSIA Aviation Group (MAG), the owner of Malaysia Airlines, hoped to complete the group’s restructuring exercise by end of the first quarter after it won a UK Court approval on Wednesday to convene a crucial meeting with creditors.

Hit hard by the Covid-19 pandemic that scuttled its previous turnaround plan, MAG said it has since September embarked on a new “holistic restructuring exercise” aimed at resizing the business.

The restructuring, MAG said, was based on a revised long-term business plan that would pave the way for MAG to ensure its long-term sustainability.

“It is expected that daily operations and activities of the main airline, Malaysia Airlines, and all subsidiaries under MAG would not be impacted by the ongoing restructuring, ” MAG said.

“The group remains committed to its entire ecosystem including its customers, suppliers and other stakeholders and aims to ensure that the restructuring exercise is carried out in a fair and transparent manner, ” it added.

High demand for chips

Unisem (M) Bhd has priced the final tranche of its new shares to be placed out to investors at a near record high on Tuesday, taking advantage of investors’ strong appetite for semiconductor stocks to increase its public shareholding spread.

The plan to issue 72.7 million new shares was first announced in November, with the first tranche of 51.6 million shares sold for RM5.50 each.

Unisem shares had shot up since then, thanks to a global shortage of electronic chips.

On Wednesday, the semiconductor assembly and test services company said the final tranche of 21.08 million new shares were priced at RM7.70 each.

TA Securities, in its update on Unisem yesterday, raised its target price for the stock to RM9.42 from RM6.73 previously, valuing the company at 35 times its projected 2021 earnings.

It said the completion of the private placement exercise would allow the company to resolve its minimum public shareholding spread issue.

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