KUALA LUMPUR – The implementation of the third movement control order (MCO 3.0) from May 12 to June 7 is expected to cost the Malaysian economy RM300 million daily.
Public Investment Bank Bhd (PIVB) said MCO 1.0 (March 18 to May 3 last year) cost the economy an estimated RM2 billion per day, while the amount is RM300 million per day during MCO 2.0 (January 13 to 26).
“Given the similarities, MCO 3.0 could also see a daily hit of about RM300 million to the economy, particularly from restrictions on contact-sensitive businesses, which will be a drag on the services sector,” it said in a note today.
Citing a potential national disaster if the lockdown is not enforced, Prime Minister Tan Sri Muhyiddin Yassin yesterday said more drastic measures have to be taken in light of the emergence of new Covid-19 variants and higher infectivity rates due to non-compliance with standard operating procedures.
Saying there will not be fear or panic as most economic sectors will remain open, PIVB, however, noted that the start-stop nature of these measures does not bode well for sentiment, and may prove to be a drag on the gross domestic product-dominant services sector.
“We are concerned that the improvement in labour market conditions may be delayed by the constant MCOs and resultant strains on businesses, while the government may also find it is hard-pressed to continue supporting households and businesses without putting further strains on its coffers should these conditions persist.”
The bank said it has always cautioned that the pandemic could still trip up enthusiasm in the market.
“Market sentiment improved late last year with the first roll-outs of much-awaited Covid-19 vaccines. However, that excitement appears to be floundering amid a global resurgence in Covid-19 cases and the relatively laboured pace of vaccinations domestically.”
On the equity market, PIVB said it remains trading-oriented with volatile swings to be expected, but has lowered its 2021 year-end FTSE Bursa Malaysia KLCI closing target to 1,690 points at 16 times to one-year forward earnings on rising risk premiums.
Previously, its target was 1,750 points at 16.5 times to one-year forward earnings.
PIVB also retained its “overweight” stance on the manufacturing, technology, consumer, oil and gas, gaming, and rubber glove sectors, seeing no changes in the fundamentals of the recovery story for now. – Bernama, May 11, 2021
