Pros and cons of Covid-19 impact on industries


THE Covid-19 pandemic has taken a toll on many sectors and industry players, inducing rising concerns nationwide over the country’s economic outlook if the situation worsens.

Bank Negara Malaysia has warned that Malaysia is likely to fall into recession this year, with the GDP estimated to be between 0.5% and -2% due to the economic impact arising from the Covid-19 pandemic.

The Movement Control Order (MCO), which is currently enforced until April 28, will also dampen domestic economic activity.

Among the worst-hit industries is the airline sector, which has been grounded for the most part by travel bans imposed to curb the spread of the virus.

Last Monday, Malaysia Airlines Bhd had — for the first time in its history — no interstate operations in Peninsular Malaysia due to poor load factor making it “not economically viable” to operate, The Malaysian Reserve (TMR) reported.

The national carrier will still serve long-haul routes such as Tokyo, Sydney, Shanghai and Hong Kong, while its sister company Fly Firefly Sdn Bhd maintains its operations in the peninsula with a very low frequency.

AirAsia Group Bhd also suspended its short-haul and medium-haul flights last month, while Malindo Airways Sdn Bhd was reported to have ceased all flights this month with 70% of its workforce being requested to take unpaid leave.

Meanwhile, there were 170,085 cancellations of hotel room bookings valued at RM68 million as of March 16, 2020, impacted by Covid-19, the Malaysian Association of Hotels said last month.

Things are also looking bleak for the oil and gas industry as oil prices have fallen to as low as US$23 (RM99.13) per barrel — the lowest since 2002 — on weak demand due to work and travel restrictions globally.

Oil price volatility has also been exacerbated further by the price war between Saudi Arabia and Russia, although the two are now leading the OPEC and its allies in an agreement to cut oil output by 10 million barrels per day.

Meanwhile, gaming firm Genting Bhd has temporarily closed its premises worldwide due to the Covid-19 outbreak.

Operations at Genting Malaysia Bhd’s Resort World Genting in Genting Highlands have halted since March 18, when the MCO was first enforced. Genting Singapore plc’s Resort World Sentosa followed suit on April 6 in line with Singaporean government orders.

Resorts World Casino New York City in the US, the Genting group’s casinos in the UK and Resorts World Birmingham are also temporarily shuttered.

On the flip side, select sectors are benefitting from the virus outbreak. The Malaysian Rubber Glove Manufacturers Association expects global glove demand to surge by 20% to 25% in the interim, TMR reported last month.

Top Glove Corp Bhd, the world’s largest rubber glove manufacturer, also said it’s seen sales volume doubling since February this year.

AmInvestment Bank Bhd in a recent research note upgraded the private healthcare sector to ‘Overweight’ from ‘Neutral’, as growth prospects for the sector globally are positive over the long term, backed by an ageing population, rising affluence and increasing life expectancy.

“The local private healthcare sector has added catalysts, ie medical tourism backed by its highly competitive charges and hospitalisation costs (versus those in developed countries), a generally English-speaking population and various incentives provided by the government.

“We anticipate a contraction in earnings in 2020 in light of the Covid-19 pandemic, which will significantly impact the healthcare sector in the short term. However, we expect recovery to kick in in 2021,” it said.

It expects KPJ Healthcare Bhd’s earnings will drop by 7% in its financial year ending Dec 31, 2020 (FY20), but recovery in FY21 is expected with an 11% growth in earnings.

As for IHH Healthcare Bhd, the group’s FY20 earnings are anticipated to plunge 13%, but recover in FY21 with a 45% growth in earnings.