Large caps to gain from National Recovery Plan

Investors will be turning their attention to large-capital stocks such as Maybank, Genting and MAHB

by SHAHEERA AZNAM SHAH / Pic by BLOOMBERG

INVESTORS are likely to shift their focus towards economic recovery-related counters on the back of the government promoting its economic revival plan as the country achieves herd immunity in its fight against the Covid-19 pandemic.

Dubbed as the “National Recovery Plan”, Prime Minister Tan Sri Muhyiddin Yassin said a full economic recovery is expected to be achieved by year-end as all economic sectors resume operation in Phase 4 of the plan, which is estimated to be between November and December.

CGS-CIMB Securities Sdn Bhd believes leading up to Phase 3 in September to October, investors will be turning their attention to large-capital stocks such as Malayan Banking Bhd (Maybank), Genting Bhd and Malaysia Airports Holdings Bhd (MAHB), as such companies benefit from the upcycle in economic activity as the movement restriction is eased after infections numbers fall and the vaccination programme achieves some major milestones.

The government revealed it will have a supply of 16 million more doses of Covid-19 vaccines by the end of July.

“When added to the current vaccine supply in the country of around 7.6 million doses, this means it will have at least 23.6 million doses of vaccines, sufficient to vaccinate 11.8 million people, or 45% of the target population of 26 million, to achieve herd immunity.

“If these targets are successfully met, we expect investors to shift their portfolios in favour of recovery stocks,” CGS-CIMB Securities stated yesterday.

Putrajaya outlined four stages spanning over the next six months for the gradual reopenings for all economic sectors when daily positive cases are estimated to be below 500 infections a day.

Malaysia is currently in Phase 1, which is expected to end on June 28, before moving on to the second phase if the daily Covid-19 positive cases sustained under 4,000 cases.

Administration-wise, Muhyiddin said the Parliament, which has been suspended since Malaysia declared an emergency state in January, will be allowed to reconvene in Phase 3 of the recovery plan.

CGS-CIMB has maintained its growth forecast for Malaysia’s GDP of 4.4%, given the estimated daily revenue loss of the economy is in line with the research house’s projection.

The benchmark FTSE Bursa Malaysia (FBM) KLCI dropped 0.19% or three points to 1,578 yesterday, counters in the consumer products, plantations and transportations leading the declines.

Nestle (M) Bhd closed 80 sen or 0.59% lower at RM134.6, while Fraser & Neave Holdings Bhd fell 52 sen or 1.96% to RM26. Developer Euro Holdings Bhd closed at a limit down or 51 sen lower at RM1.21.

Plantation counters like Kuala Lumpur Kepong Bhd fell 26 sen or 1.25% to RM20.72 while, Genting Plantations Bhd fell 31 sen or 4.15% to RM7.17.

Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said the heightened political risk in the market is mitigated by the encouraging immunisation rate.

“Generally, investors tend to stay away from the market when political uncertainties surface. However, the recent encouraging vaccination rates in the country has provided some comfort to investors as it provides a faster pathway to reach herd immunity by year-end,” he told The Malaysian Reserve.

Adam added investors are more prone to be spooked by the disruption in vaccine deliveries and supplies and any unexpected hurdle in the distribution of vaccines could dampen sentiment.

“With the assumption that vaccination rates are maintained at current levels, we expect the FBM KLCI index to trade in a range of 1,580 to 1,600 points and for the ringgit to be supported within the RM4.10 to RM4.11 range,” he said.

RAM Rating Services Bhd economist Nur Nadia Mazlan said foreign fund inflows into Malaysian debt was at its weakest since September 2020, rising by RM1.9 billion to RM247.9 billion, tracking the broader regional trend.

Foreign investors remained net buyers of Malaysian bonds, albeit at a tapered pace, for the 13th consecutive month in May 2021.

Their overall holdings rose by RM1.9 billion to RM247.9 billion, compared to RM6.4 billion buying in April.

“Last month’s smaller foreign inflow may be due to heightened risk aversion amid the resurgence in Covid-19 infections and the subsequent nationwide lockdown,” Nur Nadia said.