Daily economic losses from MCO 3.0 could be RM300m


  • Economy
  • Tuesday, 11 May 2021

KUALA LUMPUR: CGS-CIMB Equities Research estimates the return of a nationwide lockdown raises the estimated daily economic losses in Malaysia’s economy to RM300mil a day but it emphasised such stringent measuers could help curb the spread of the pandemic.

In its strategy report on Tuesday, it pointed out the economic losses from the MCO 3.0, which comes into effect on Wednesday nationwide, is much higher compared with RM200mil a day for a targeted MCO 3.0, and its baseline assumption of a conditional MCO (RM150mil a day).

“We estimate that each month of MCO would shave 0.3 percentage point from our current annual GDP growth estimate of 5.7% in 2021.

“Monetary policy is likely to remain cautious, with the OPR seen on hold at 1.75% until end-2021, ” it said.

CGS-CIMB Research said potential extensions of the nationwide MCO 3.0 beyond June 7 may see the government contemplate further economic support.

This is despite its increasingly narrow fiscal space, as a number of existing measures extended under the PEMERKASA stimulus package in March such as wage subsidies and cash transfers are due to lapse after June.

CGS-CIMB Research said the blanket MCO will be negative for the consumer, tourism-related (hotels, airlines, airports, casinos), REIT, auto, healthcare and property sectors, as the stricter lockdown will cut consumer spending in these sectors.

This could consequently dampen near-term sentiment and prompt investors to take profit on recovery-play stocks (banks, auto, property, construction and tourism-related) that have done well, on concerns of earnings risks in the near term, and switch to defensive plays (utilities, telco and glove makers).

REIT players with exposure to hotel and shopping mall portfolios (KLCCP, IGB Reit, CMMT, Pavilion Reit, Sunway Reit) as well as Genting Malaysia and Genting will likely be negatively impacted by the MCO due to stricter travelling rules and the maximum cap of three pax per vehicle.

Property, auto, hospital, airlines and airports will be affected as consumers could defer spending in the short-term due to the MCO and uncertain economic prospects.

However, earnings risks are likely to be lower compared to MCO 1.0 as more economic sectors are allowed to operate under MCO 3.0.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!
   

Next In Business News

Malaysia's economy on solid and stable footing despite global headwinds - Tengku Zafrul
Hiap Teck posts RM156.01mil net profit in FY22
Gadang secures RM188mil contract from Public Works Department
HSBC expects OPR to touch 3.5% by 1H 2023
Gamuda posts record net profit of RM806.23mil in FY22
Aeon Credit Service posts 2Q net profit of RM75.65mil
Bursa reverses earlier gains to end lower, KLCI drops below 1,400 mark
Asia File records 25% sales increase in FY22
ECB policymakers back another jumbo hike as inflation rises further
Porsche debuts with US$72bil price tag in bumper IPO

Others Also Read