MALAYSIAN stocks tumbled to a seven-month low amid a sell-off across much of South-East Asia’s equities markets, after the local government extended a nationwide lockdown due to elevated Covid-19 infections.
The FTSE Bursa Malaysia KLCI Index dropped as much as 1.3% yesterday, while Indonesia’s stock benchmark fell the most in six weeks. In Thailand, the key index sank by as much as 1.1% to the weakest since late May.
The Thai baht and the Philippine peso led declines among South-East Asian currencies, weakening 0.3% each versus the dollar. Indonesia’s rupiah dropped 0.1%.
Nations from Malaysia to Thailand are struggling to contain the pandemic, clouding recoveries in their economies. Indonesia reported fresh records in daily cases, while Thailand suspended dine-in services for a month at restaurants in Bangkok and nearby provinces.
“The tightening in restrictions in some parts of South-East Asia to curb rising Covid-19 cases will hurt domestic demand and hold back economic recovery,” said Khoon Goh, head of Asian research in Singapore at Australia & New Zealand Banking Group Ltd.
“Given the need for more policy support, especially on the fiscal side, this is weighing on domestic asset prices in those countries.”
A gauge of South-East Asian stocks tumbled as much as 0.9% to the lowest level since May 21. The measure is down 7% from a January high.
The Philippines will likely shed light on whether to keep or relax its current when President Rodrigo Duterte holds a recorded televised weekly press conference.
The Manila capital region and neighbouring Bulacan Province are under “general community quarantine” with “some restrictions” until tomorrow. The benchmark index was down as much as 0.6%.
In Malaysia, the government expects its economy will bounce back in the final three months of the year, as the ongoing lockdown poses risks to its growth trajectory.
The World Bank last Wednesday slashed its 2021 growth forecast for the nation to 4.5% from 6%.
“Stricter controls in several countries will hurt the market sentiment,” said Kitpon Pripisankit, an analyst at UOB Kay Hian Securities (Thailand) pcl.
“This should push downside pressure on the equities, whose valuations are stretched on optimism about economic reopening.”
The movement restrictions will stay in place until daily cases fall below 4,000, the official Bernama news agency reported on Sunday, citing Prime Minister Tan Sri Muhyiddin Yassin.
The Malaysian stock index is down more than 8% from a Dec 11 high amid concern over the government’s handling of the pandemic and rising political risks.
The country returned to a hard lockdown this month after new cases topped a record 9,000 by end-May.
The closing of all but essential sectors is costing the economy RM1 billion a day, Muhyiddin said earlier this month while unveiling a recovery plan.