MCO 3.0 will have less adverse economic impact than previous MCOs — CGS-CIMB

TheEdge Fri, May 07, 2021 12:37am - 2 years View Original


KUALA LUMPUR (May 6): CGS-CIMB Securities expects the targeted Movement Control Order (MCO) 3.0 to have less adverse economic impact compared with MCO 1.0 and 2.0, with daily economic losses to be lower than the near-nationwide MCO 2.0.

The stockbroking firm said economic losses for MCO 3.0 would be lower than RM300 million per day recorded during MCO 2.0, and marginally higher than the RM150 million per day it estimated in its baseline scenario under the Conditional Movement Control Order.

“The extension of wage subsidies and cash transfers to June 21, as well as existing policy support such as targeted repayment assistance, Employees Provident Fund (EPF) withdrawals, and credit facilities, will partially buffer the impact of the latest movement restrictions,” it said in a note today.

Thus, it reiterated its Gross Domestic Product growth forecast of 5.7% for 2021 given the limited downside and the conservative assumptions on recovery trajectory.

However, the stockbroking house said the implementation of MCO 3.0 in selected States and districts as well as rising COVID-19 cases were likely to pose some earnings risks to real estate investment trust players with exposure to hotels, shopping malls as well as tourism-related plays.

CGS-CIMB also pointed out that the delay in the rollout of Phase 3 of the Covid-19 immunisation programme could impact the timeline of when the country could achieve herd immunity and reopen its borders.

“As such, this could dampen near-term sentiment and prompt investors to profit-take on recovery-play stocks (banks, auto, property, construction and tourism-related plays) on concerns of earnings risks in the near term, and switch to defensive plays such as utilities, telco and glove makers,” it said.

It added that it was keeping its FTSE Bursa Malaysia KLCI target of 1,699 points.

CGS-CIMB’s top picks are Inari-Amertron Bhd (target price, or TP, of RM3.90) on rising demand for radio frequency chips, Public Bank Bhd (TP: RM5.20) for being most defensive against the credit risks arising from the COVID-19 outbreak, and Telekom Malaysia (TP: RM6.80) due to its robust core earnings per share growth.

Kuala Lumpur and several districts in Terengganu, Johor and Perak will be placed under the MCO from May 7 to 20, while movement order for six districts in Selangor started today and will continue until May 17.

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