Malaysian business sentiment hits fresh low in 2Q amid Covid-19 outbreak

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KUALA LUMPUR (March 24): Business sentiment among Malaysian companies dived to a new low in the second quarter of 2020 (2Q 2020), sinking into the contractionary zone of -21.52 percentage points, from +10.22 percentage points in 1Q 2020, according to Dun & Bradstreet (D&B) Malaysia’s latest Business Optimism Index (BOI) study.

The last time the index slipped into negative territory was in 4Q 2015.

Dun & Bradstreet (Malaysia) Sdn Bhd chief executive officer Audrey Chia said sentiments among Malaysian firms have plunged to a new low due largely to the recent surge in the coronavirus (Covid-19) cases.

“We expect the dampened outlook to persist into the second and third quarter of 2020 given that a potential near-term recovery of the hardest hit sectors such as services and transportation is quite unlikely," she said in a statement today. 

“However, we might be able to see some green shoots once the active cases begin to peak globally. In view of these adverse developments, we have trimmed our 2020 growth forecast to 4%,” Chia added. 

On a year-on-year (y-o-y) basis, D&B noted that the BOI fell to -21.52 percentage points in 2Q 2020 from +5.61 percentage points a year ago.

The BOI study also showed that all six business indicators, comprising volume of sales, net profit, selling price, inventory level, employees and new orders, have declined on the quarterly and yearly basis. 

For the quarter-on-quarter (q-o-q) basis, net profit declined sharply from +11.11 percentage points in  1Q 2020 to -40.20 percentage points in 2Q 2020; volume of sales down from +8.7 percentage points to -27.84 percentage points; selling price fell from +10.14 percentage points to -10.31 percentage points; new orders contracted from +24.16 percentage points to -26.80 percentage points; employment levels decreased from +9.17 percentage points to -5.21 percentage points and inventory levels fell from -1.93 percentage points to -20.62 percentage points. 

On a y-o-y basis, volume of sales were down from +6.83 percentage points in 2Q 19 to -27.84 percentage points in 2Q 2020; net profits dropped from +1.95 percentage points to -40.20 percentage points; selling price fell from +6.83 percentage points to -10.31 percentage points; new orders plunged from +10.24 percentage points to -26.80 percentage points; inventory levels fell from +4.39 percentage points to -20.62 percentage points and employment levels dropped from +3.41 percentage points to -5.21 percentage points. 

The study revealed that the majority of the sectors are pessimistic about their outlook, with the services and transportation sectors being the least optimistic.

Both services and transportation sectors are pessimistic about their prospects, with all six indicators in the contractionary zone for 2Q 2020. 

Meanwhile, the manufacturing sector expects its outlook to dampen significantly, with five indicators in the negative territory. Similarly, for the wholesale trade, the sentiment for the sector is downbeat and has five indicators in the negative region.

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