Gainers and losers of the coronavirus pandemic

The MCO is a blessing in disguise for some home-cooked meal entrepreneurs as demand continues to increase daily


JUST like any other conflict or crisis, there will always be those who benefit from it and there will be those on the losing side. The current coronavirus pandemic that is raging around the world is no different.

Generally, the whole global economic system is plummeting. Equities have lost trillions in value, oil prices are testing the US$20 (RM86.60) level and many currencies have been banished to lows last seen either during the Asian financial crisis or the global financial crisis.

The outlook is more negative. Malaysia recently introduced an economic stimulus package, totalling RM250 billion, to save the economy and hopefully millions of jobs.

Prime Minister Tan Sri Muhyiddin Yassin said Malaysia is “a nation at war with invisible forces”.

The Malaysian Reserve looks at some of the sectors and industries which have been battered and others which have been “at the right time at the right crisis”.

Essential Goods and Healthcare

Despite the Movement Control Order (MCO), these two sectors have been largely unscathered by the virus. Demands for food products have been on an upward trend.

The stimulus package which will see more money in the purse, will likely be spent on these daily necessities.

As Covid-19 is a healthcare issue, the sector and subsectors are enjoying brisk sales compared to retailers in fashion or non-essential sectors. This is evidently seen via the increased sales volumes of sanitisers, gloves, masks, medicines and vitamins as people put health above everything else.

Supermarkets, hypermarkets and grocery shops are also seeing brisk sales despite having to comply with the rules of limited operating hours and social distancing.

Although the implementation of MCO has also caused irrational buying patterns, it has also increased people’s basket spending as worries of a possible curfew or shorter hours of movements have driven people to stock up on staple products.

In some cases, despite assurances from the government, there were sporadic cases of panic buying and hoarding which cause empty shelves being spotted at hypermarkets and supermarkets, especially essential food items.

Many producers are also in a jam as some have reached their production capacity, hence, everything from rice to sugar, milk and butter to fruits and even ice-cream have seen a good run of sales.

The airline industry is badly affected by the pandemic which resulted in more than 50 airlines grounding their planes. To date, MAB has cancelled more than 4,000 flights

The Almost Non-Existent Airlines and Tourism Industry

More countries have fenced their borders, barring travel of citizens and foreigners, putting an end to air travel. This resulted in more than 50 airlines grounding their planes.

The International Air Transport Association (IATA) estimates the pandemic will cost carriers up to US$252 billion in revenue loss. Many carriers have returned their planes to lessors, while others are invoking pay cuts to preserve cash.

AirAsia Group Bhd and AirAsia X Bhd (AAX) announced to temporarily suspend their flights during the second quarter of 2020 (2Q20).

Malaysia Airlines Bhd (MAB) has significantly reduced its overall network and suspended its international flights. To date, MAB has cancelled more than 4,000 flights.

Malindo Airways Sdn Bhd has also grounded all its planes. Despite the lower fuel prices, carriers will need billions in capital injection or risk no returning to the sky.

Malaysia’s tourism sector is expected to be hit by RM3.37 billion in losses following the travel ban and cancellations of hotel bookings. The tourism subsector is staring at zero revenue and many will shutter.

More than 50 million jobs in the global travel and tourism industry are at risk, said the World Travel and Tourism Council.

Glove Manufacturers Minting Money

Glove makers continue to be one of the beneficiaries as demand from hospitals surges. Malaysian Rubber Glove Manufacturers Association (MARGMA) has assured the World Health Organisation (WHO) that Malaysia will continue to supply medical gloves.

Top Glove Corp Bhd, the top rubber glove maker, has the ability to produce about 200 million gloves a day at full capacity.

According to figures, Top Glove’s orders have now reached until August, which surpasses its usual three months’ order backlog. In order to cope with the extra orders, Top Glove’s plants are now running well above 95% utilisation rate.

Other similar glove markers are also ramping up productions to meet the demand as the number of Covid-19 infections sails past 650,000 people.

Less Interest Margin and Rising Bad Loans for Banks?

The country’s RM1.7 trillion banking sector is not spared from the economic repercussions of the pandemic. Share prices of lenders have been battered, losing billions in value.

Things will get worse for banks’ profit this year due to the anticipated weaker loan growth, Overnight Policy Rate (OPR) cuts, and softer non-interest income (NOII) and net credit cost (NCC).

Bank Negara Malaysia (BNM) has announced a slew of measures to soften the impact to consumers including a six-month moratorium of loan repayments totalling at least RM100 billion.

Hong Leong Investment Bank Bhd (HLIB) said the automatic six-month loan moratorium could affect banks’ cashflow as both the loan principal and interest need not be serviced temporarily.

The research house has trimmed the sector’s loan growth projection to 3.5% and 3.4% for 2020 and 2021 respectively from 4.3% and 4.2% previously.

HLIB also expects BNM to cut Malaysia’s OPR by another 50 basis point (bps) to 2% this year as early as within the first half of 2020. The sector’s earning is expected to fall by 7.4% this year and rebound by 1.7% in 2021.

What is scary is the prospect of the rising non-performing loans (NPLs) from both individuals and corporates. With the prospects of thousands losing their jobs and companies pressured with thin income, the sector is expected to see a spike in bad debts.

The country’s household debt alone is about 85% of the country’s GDP, meaning a 10% spike in bad debt from this segment alone would see lenders stunned with about RM130 billion in NPLs or overall NPLs of about 7.6% of the whole banking system, without taking into account the failures of small and medium enterprises (SMEs) and corporates to service their loans.

Fast-food Outlets and the Makcik Tipah, Leha and Home-Cooked Meals

The MCO has been a blessing for most fast-food outlets and restaurants. Delivery and takeaways have allowed their kitchen to keep cooking.

Although demand has not been as high compared to dine-in consumers, the partial lockdown has allowed the establishments to continue serving the consumers who eat more at home.

At the same time, home-cooked meal entrepreneurs are mush-rooming in many communities in the country. Word of mouth and social media platforms are used to market their delicacies, largely for order. Housewives are taking advantage of the rising demand for home-cooked meals to offer such services.

From the usual breakfast, lunch or dinner sets, the services have expanded to other food items including breads and other traditional delicacies. These entrepreneurs are providing the much needed services to communities and at the same time creating new business avenues which may continue after the pandemic is over.